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If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. •

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Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Commercial importers of Part-II goods face a 3.5% withholding tax if they are Filers, but the rate doubles to 7% for Non-Filers. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Winning a prize bond or crossword puzzle means you lose 15% to taxes as an Active Filer, but a massive 30% if you are a Non-Filer. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Profits on debt from mutual funds deriving 50% or more income from debt carry a huge 50% tax for Non-Filers, compared to 25% for Filers. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • The withholding tax on banking and financial institution profits is set at 20% for those on the Active Taxpayers’ List, but jumps to 40% for those off the list. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Payments made to non-resident sportspersons incur a 15% tax if they are on the ATL, and a massive 30% if they are non-ATL. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Buying a high-end 2501cc to 3000cc vehicle leaves Filers with a 9% tax bill, but absolutely punishes Non-Filers with a massive 27% tax rate. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Commercial importers bringing in Part-III items are hit with a 12% tax rate if they are Non-Filers, compared to only 6% for Active Filers. •

What is Further Tax in Sales Tax Act

Understanding Pakistan's "Further Tax": an additional 4% sales tax on supplies to unregistered persons. Learn exemptions for specific goods (utilities, Third Schedule items, etc.) and the impact of a recent court ruling clarifying its non-applicability on pharmaceutical products after a 1% manufacturer's tax.

Further tax is an additional levy charged on taxable supplies made by a registered person to an individual or entity that has not obtained a sales tax registration number or, if registered, is not on the active taxpayers’ list (ATL). The primary objective behind the imposition of further tax is to encourage businesses and individuals to register for sales tax and become part of the documented economy. It acts as a disincentive for registered persons to make sales to unregistered entities, thereby broadening the tax base.

What is the Rate of Further Tax?

The rate of further tax has been subject to changes over time. Currently, as per the amendments brought by the Finance Act, 2023, the rate of further tax is 4% of the value of supplies. This is in addition to the standard rate of sales tax applicable to the goods. Previously, this rate was 3%.

Exemptions from Further Tax:

While further tax is applicable in many situations involving sales to unregistered persons, there are specific exemptions provided under the Sales Tax Act, 1990, and through various Statutory Regulatory Orders (S.R.O.s) issued by the Federal Board of Revenue (FBR). Key exemptions include:

Specific Goods (as per S.R.O. 648(I)/2013 and subsequent amendments/notifications):
- Electrical energy supplied to domestic and agricultural consumers.
- Natural gas supplied to domestic consumers.
- Motor spirit, diesel oil, jet fuel, kerosene oil, and fuel oil.
- Goods sold by retailers to the end consumers.
- Supply of goods directly to end consumers, which can include items like food, beverages, fertilizers, and vehicles (subject to specific conditions outlined in relevant S.R.O.s).
- Items that fall under the Third Schedule of the Sales Tax Act, 1990 (these are goods subject to retail price taxation, where the tax is levied on the printed retail price).
Supplies Already Exempt from Sales Tax: A general principle, often upheld by courts, is that if a supply of goods is itself exempt from sales tax (for example, goods listed in the Sixth Schedule of the Sales Tax Act, 1990), then further tax should not be applicable on such supplies. This is particularly relevant if the person making the supply is not legally required to be registered for sales tax because their business solely involves exempt supplies. The Lahore High Court has reinforced that taxpayers are not obligated to pay further tax on items already exempt under the Sixth Schedule.
Specific Sectoral Rulings (like in Pharmaceuticals): As highlighted by the recent court decisions concerning the pharmaceutical sector, once a specific tax liability (like the 1% final tax by manufacturers) is considered to cover the subsequent supply chain for sales to end consumers, further tax may not be applicable even if sales are made to unregistered persons within that defined exempt part of the chain.
Federal Government’s Power to Exclude: The Federal Government holds the power, under Section 3(1A) of the Sales Tax Act, 1990, to exclude certain taxable supplies from the scope of further tax.

Recent Court Decision Clarifies Further Tax Application on Pharmaceutical Products

A recent decision by the tax court, subsequently upheld by the High Court, has provided significant clarity on the application of further tax on pharmaceutical products in Pakistan. This development also brings to the forefront the broader concept of “further tax” within sales tax regime.

The core of the pharmaceutical issue lies in the interpretation and application of sales tax and further tax on pharmaceutical products following changes introduced by the Finance Act.

Initially, pharmaceutical products enjoyed a tax-exempt status. However, this changed in January 2023 when a standard rate of tax was temporarily imposed for approximately six months. The Finance Act then brought another shift, mandating a 1% final tax on pharmaceutical manufacturers at the point of sale to distributors, wholesalers, or retailers.

The complexity arose in scenarios involving further sales down the supply chain. According to the video’s explanation, if a manufacturer sells to a distributor, only the 1% final tax is applicable. However, if the same manufacturer sells to a party outside of this defined chain, an additional 4% further tax was being charged on top of the 1% sales tax.

Crucially, the law also stipulated that once the manufacturer has paid the 1% final tax, the subsequent supply chain – encompassing distributors, wholesalers, and retailers – is exempt from further tax when selling the products to the end consumer. Despite this, a company found itself facing a notice demanding a 4% further tax on sales made by its distributor to unregistered wholesalers or retailers. This interpretation by the tax authorities led to a significant dispute.

Court Ruling and its Implications for the Pharmaceutical Industry

The tax court, upon reviewing the case, ruled in favor of the taxpayer. The court affirmed that since the pharmaceutical product becomes exempt in the supply chain after the manufacturer has paid the 1% final tax, no further tax can be legitimately charged on subsequent sales.

This pivotal decision was later reinforced by the High Court, leading to the withdrawal of a substantial 6.8 million Rupee penalty that had been imposed on the company. The implications of this ruling are far-reaching for the pharmaceutical industry.

Muhammad Ebrahim

Intern at TaxationPk, actively contributing to various taxation-related projects. Continuously learning and gaining hands-on experience, bringing enthusiasm and a fresh perspective to the team.

Articles: 46

5 Comments

Sohail

September 30, 2025 / 11:16 am Reply

Is Further Tax @ 4% applicable to Registered Person for the sales of Cake Products?
M.ayaz

September 11, 2025 / 8:08 am Reply

Is FATS still exempt sir?
Mahmood Alam

July 21, 2025 / 11:12 pm Reply

Sir, kia electric bike sales to end consumer pr further sales tax Lago ho ga, pl. Help this relevant law sros, pl. Send me our email. Thanx
Mahmood Alam

July 21, 2025 / 12:05 pm Reply

Sir, kia electric bike sales to end consumer by manufacturer pr Lago hota hai
RANA AHMED NASIR KHAN ADVOCATE

May 3, 2025 / 7:44 pm Reply

IS FURTHER TAX APPLICABLE ON PHARMACEUTICAL PRODUCTS..