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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. • 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. • 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. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% 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. • 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. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 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. • 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. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-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. • 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 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. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% tax for Non-Filers. • 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. • 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. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for Non-Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% 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. • 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. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 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. • 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. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-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. • 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 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. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Dividends from Real Estate Investment Trusts (REITs) and general companies cost Active Filers 15% in tax, but Non-Filers lose a massive 30%. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. •

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Do you know?

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. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for 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. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • 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. • 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. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax 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. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% 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. • 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. • 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 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. • 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. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • 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. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Capital gains arising on the disposal of certain debt securities are taxed at 15% for Filers, but double to 30% for Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for 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. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • 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. • 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. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax 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. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% 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. • 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. • 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 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. • 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. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. •

Key Amendments in Sales Tax and Federal Excise Duty (Finance Act, 2026)

A briefing (2 Aug 2025) summarizing the Finance Act, 2025 amendments to the Sales Tax Act, 1990 and Federal Excise Act, 2005—highlighting e-commerce taxation, strengthened anti-fraud powers (CTS/e-bilty), and the rationalization of exemptions.

Syed Babar
August 6, 2025
Tax Toolkit

The Finance Act 2026, introduces significant legislative measures primarily aimed at broadening the tax base, enhancing compliance, strengthening enforcement against tax fraud, streamlining administrative processes, and rationalizing exemptions Pakistan.

I. Sales Tax Act, 1990 (STA) Amendments:

The Finance Act 2026. introduces a wide range of amendments to the Sales Tax Act, 1990, prioritizing digital enforcement, expanding the retail price-based tax net, and providing targeted social exemptions.

1. Digital & “Faceless” Administration

A major portion of the amendments focuses on removing physical interaction through technology:

National Faceless Centre: The Act establishes this center to conduct tax proceedings, including audits and assessments, in a faceless manner through algorithms developed by the Board.
Algorithmic Settlement Mechanism: A new digital system is introduced to offer automated “settlement offers” to taxpayers at various stages of proceedings. If a taxpayer accepts and deposits the offered amount, the specific audit issues or notices are abated.
Electronic Invoicing: The Act mandates an “electronic invoicing system” for the issuance and recording of sales tax invoices. All registered persons, including those making exempt supplies, must now issue invoices (including advance receipt invoices) bearing a verifiable and unique FBR invoice number.

2. Expansion of Retail-Price Based Taxation (Third Schedule)

The Act significantly expands the list of items where sales tax is charged based on the retail price printed on the packaging. New items include:

Food & Staples: Vegetable/animal fats and oils, sugar confectionery, pasta (spaghetti, noodles, etc.), sauces, ketchup, jams, jellies, and milk products (including infant formula).
Household Items: Petroleum jelly, crockery, household utensils (stainless steel, melamine, etc.), and ceramic products like wash basins and tiles.
Personal Care: Hair preparations, shaving creams, personal deodorants, and toilet/facial tissues.
Others: Car and automobile accessories.

3. Enforcement & Anti-Fraud Measures

Simulated Invoice Issuers Register: To combat fake invoices, the FBR will maintain a public register of persons involved in fictitious transactions. Any input tax credit claimed by a buyer from a person on this list will be reversed automatically.
Production Monitoring System: Manufacturers must now integrate with a real-time production monitoring system, which includes video analytics and tax stamps. Failure to integrate can result in a penalty of one million rupees for the first default and five million for continued non-compliance.
Confiscated Goods: Goods liable for confiscation will now be sold through public auction, which may be conducted electronically.

4. Targeted Exemptions & Relief (Sixth Schedule)

Health & Hygiene: Contraceptives and female sanitary pads or tampons are now exempt from sales tax.
Aviation: The import or lease of aircraft and parts by PIACL is exempted. A similar exemption for all registered Pakistani airlines will become effective from July 1, 2027.
Security: Bulletproof vehicles imported by the Federal or Provincial Governments for specific security threats or the SCO Summit are exempt.
Agriculture: Wheat and rice bran have been added to the exemption list.

5. Sector-Specific Amendments

Steel Sector: For steel melters, re-rollers, and composite units, tax will be collected based on per unit electricity consumption (including electricity from captive power plants).
Mobile Phones: Individuals importing mobile phones for personal use (via PTA’s DIRBS) are now permitted to pay the applicable tax in installments, provided the full amount is settled within the same financial year.
Toll Manufacturing: A new withholding requirement is introduced where registered persons must withhold tax at four times the tax charged on conversion charges if the service provider is a non-registered person.
Power Sector: A reduced 1% minimum value addition tax applies to the import of coal supplied directly to Independent Power Producers (IPPs).

6. Legal & Procedural Oversight

Independent Case Scrutiny Committee: Similar to the income tax reforms, any references or appeals filed by the Commissioner before the High Court or Supreme Court must now be approved by this independent committee.
Penalties: General penalties for non-filing, non-payment, and records maintenance have been significantly increased, with many minimum amounts rising from ten thousand to fifty thousand rupees.

II. Federal Excise Act, 2005 (FEA) Amendments:

The Finance Act, 2026 introduces extensive amendments to the Federal Excise Act, 2005, focusing on digitizing enforcement, establishing a “faceless” administrative structure, and revising duty rates for luxury imports, air travel, and petroleum products.

1. Digital and “Faceless” Administration

The Act aligns federal excise procedures with modern digital standards:

National Faceless Centre: A new administrative framework is established to conduct audit and assessment proceedings virtually, without face-to-face interaction between officers and taxpayers.
Algorithmic Settlement Mechanism: A digitally operated system is introduced to offer automated “settlement offers” at various stages of tax proceedings. Accepting and depositing the offered amount leads to the abatement of the relevant proceedings.
Electronic Invoicing: All registered persons must issue invoices (including advance receipt invoices) through an electronic system. These invoices must bear a verifiable and unique FBR invoice number.
Production Monitoring System: The Board is empowered to implement real-time tracking of production, sales, and stocks through technologies like video analytics, tax stamps, banderoles, and barcodes.

2. Enforcement and Penalties

Data Manipulation: Any person who deliberately destroys, erases, or manipulates data in an electronic production monitoring system is guilty of an offence. Penalties include fines up to seventy-five thousand rupees or ten times the duty involved (whichever is higher) and imprisonment for up to five years.
Confiscation of Counterfeited Goods: Counterfeited cigarettes, beverages, or goods produced without required electronic monitoring are liable to outright confiscation and destruction.
Abatement of Proceedings: If a person receives a show-cause notice, they may choose to deposit the duty amount along with fifty percent of the penalty to abate further proceedings.

3. Legal and Procedural Reforms

Independent Case Scrutiny Committee: Any legal reference or appeal filed by the Commissioner Inland Revenue before a High Court or the Supreme Court must first be approved by this independent committee.
Audit Powers: The Commissioner can now direct a registered person to have their accounts re-audited by a nominated accountant or their inventory re-valued by a cost accountant if the complexity or volume of accounts justifies it.

4. Revised FED Rates (First Schedule)

The Act substitutes and adds several entries to the duty schedules:

Item / Category	New FED Rate
Imported Motor Cars/SUVs (2000cc to 3000cc)	86% ad valorem
Imported Motor Cars/SUVs (Above 3000cc)	92% ad valorem
Electric Vehicles (Value < $75,000)	0%
Electric Vehicles (Value $75,000 – $110,000)	30% ad valorem
Electric Vehicles (Value > $110,000)	40% ad valorem
Lubricating Oil and Base Oils	5% ad valorem
Petroleum top Naphtha / White Spirit / Solvent Oil	Rs. 80 per liter
Tobacco (Specific Heading 8a)	Rs. 16,500 per kg

5. International Air Travel

The FED on club, business, and first-class air tickets issued on or after July 1, 2026, is revised by destination:

Americas (North, Central, South): Rs. 50,000.
Middle East and Africa: Rs. 25,000.
Europe: Rs. 40,000.
Far East, Australia, New Zealand, and Pacific Islands: Rs. 40,000.

6. New Special Excise Duty

A new sub-section (3B) in Section 3 allows for the levy of a Special Excise Duty in addition to the standard duty on specific goods listed in Table-IA of the First Schedule.

7. Exemptions and Restrictions

Cigarette Brand Variants: Manufacturers are prohibited from introducing new variants of an existing brand at a price lower than the lowest actual price of the existing brand as of the budget announcement day.
Bulletproof Vehicles: The import of bulletproof vehicles by the Federal Government for the SCO Summit or for security threats against public functionaries is addressed under the Third Schedule.
Hydration Drinks: Specific hydration drinks and electrolyte beverages with low sugar content (not exceeding 5g/100ml) are excluded from certain beverage-related duty categories.