This passage explains the rules for registering for sales tax in Pakistan according to the Federal Board of Revenue (FBR). Here’s a breakdown of the key points:
Threshold for Registration:
Tax deducted under section 236H exceeds Rs. 100,000 in a year then Businesses must register for sales tax where FBR has notified 1680 businesses for compulsory registeration for Sales Tax see the list if your business is on the list Sales Tax General Order No. 01 of 2024 .
- Generally: Businesses with annual sales exceeding Rs. 20 million must register for sales tax and file monthly returns at rate of 0.5%.
- For Non-Filers (Individuals/Businesses not registered with FBR): The threshold is even lower at Rs. 4 million. This is because non-filers face a higher advance tax rate (2.5%) compared to filers.
Advance Tax (Section 236H):
- This tax is deducted at the source by the seller and paid to the government on behalf of the buyer.
- The amount of advance tax you pay throughout the year can trigger a mandatory sales tax registration.
- Previously, the threshold for registration based on advance tax was:
- Rs. 20m for filers (with a lower advance tax rate)
- Rs. 4m for non-filers (with a higher advance tax rate)
Recent Changes after Finance Act 2024:
- The advance tax rate for non-filers has been increased from 1% to 2.5%.
- This change effectively lowers the sales tax registration threshold for non-filers to Rs. 4m based on advance tax.
What it Means for You:
- If you’re a non-filer and your advance tax payments exceed Rs. 100,000 in a year, you might be required to register for sales tax.
- This could involve installing a point-of-sale system and filing monthly sales tax returns.
Recommendations:
- Consider registering as a filer to benefit from a higher threshold (Rs. 40m) for mandatory sales tax registration based on advance tax.
- Stay updated on potential changes to advance tax rates and registration thresholds.
