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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. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active 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. • 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. • 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. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-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. • 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. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • 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%. • 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. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for 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. • 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. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • 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. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active 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. • 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. • 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. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-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. • 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. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • 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%. • 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. • Cash withdrawals by a person whose name does not appear on the Active Taxpayers’ List are hit with an automatic 0.8% advance tax. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • The sale of petroleum products is taxed at 12% for Filers and exactly double that at 24% for 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. • 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. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • Providing IT and IT-enabled services costs Active Taxpayers just 4% in withholding tax, while Non-Filers must pay 8%. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. •

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Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • 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. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% 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. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • 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. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • 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%. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • 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. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • 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. • 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. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • 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. • 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. • Buyers of 1301cc to 1600cc cars pay a 2% advance tax if they are Filers, but Non-Filers pay exactly triple at 6%. • 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. • Purchasing a 1601cc to 1800cc vehicle will cost Non-Filers a 9% tax, which is three times the 3% rate given to Active Filers. • Registering a 2001cc to 2500cc luxury vehicle incurs a 7% tax for Active Filers, but a staggering 21% 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. • Companies generating rental income from immovable property pay a 15% tax if they are Active Filers, but face a 30% rate as Non-Filers. • 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. • If you receive dividends from Independent Power Purchasers (IPPs), Filers pay a 7.5% tax while Non-Filers surrender 15%. • 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%. • Active Filers importing CKD kits for Electric Vehicles pay a minimal 1% tax, whereas Non-Filers pay double at 2%. • 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. • Payments to electronic and print media for advertising services are taxed at just 1.5% for Active Taxpayers, compared to 3% for Non-Filers. • Pensions under 10 million rupees remain 100% tax-exempt for everyone, no matter what your filing status is. • Salaries under Rs. 600,000 are completely tax-free, maintaining a 0% rate regardless of your taxpayer status. • Registering a 1000cc motor vehicle costs Filers just 1% in tax, while Non-Filers are penalized with a 3% tax. • 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. • 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. • Importing basic goods from Part-I of the Twelfth Schedule costs Active Taxpayers just 1% in tax, while Non-Filers have to pay 2%. • Winning a raffle, lottery, or sales promotion prize costs Non-Filers a whopping 40% in tax, compared to 20% for Filers. • Selling rice, cotton seed, or edible oils comes with a low 1.5% tax for Filers, but a 3% tax for Non-Filers. • Importing pharmaceutical products carries an 8% tax for Non-Filers, which is exactly double the 4% rate applied to Active Taxpayers. • 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. • 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. •

How to Select Reduced Rate of Tax in KPRA?

The Khyber Pakhtunkhwa Revenue Authority (KPRA) allows certain services—such as restaurants, construction, and transport—to be taxed at reduced rates instead of the standard 16%. To claim these benefits, taxpayers must select the correct service category in Annexure C of the KPRA online return portal, where the reduced rate is applied automatically.

Faiza Ehsan
December 11, 2024
Tax Solutions

The Khyber Pakhtunkhwa Revenue Authority (KPRA) collects sales tax on services across the province. While the standard rate is generally 16%, certain services are eligible for a reduced rate of tax—typically 2%, 5%, or 8%, depending on the nature of the service and conditions attached. To benefit from these reduced rates, taxpayers must select the appropriate option in their monthly sales tax return filed through the KPRA online portal.

This guide explains the step-by-step process to correctly select and apply the reduced rate of tax in KPRA.

Standard or General Tax Rate Application

Opting for Standard Rate:
- Businesses offering services taxed at reduced rates can choose to apply the standard rate with approval from the Management Committee.
- Permissions include specific conditions, effective dates, and restrictions as set by the committee.
- Companies can notify their intention to switch to the standard rate at least one month in advance but require prior approval to revert back.
Switching Back to Reduced Rate:
- Registered persons cannot independently revert to reduced tax rates without approval.
- The Management Committee may conduct inquiries or audits before granting approval.
Input Tax Adjustments:
- Unused input tax credits accrued under the standard rate cannot be applied retroactively after switching to reduced rates.
Withdrawal of Permissions:
- The Management Committee may revoke granted permissions with due process, including a show-cause notice and an opportunity for a hearing.

Restrictions on Input Tax Adjustments

General Restrictions:
- Input tax cannot be claimed for goods or services not directly used in taxable services.
- Claims are disallowed if taxes are not deposited by the supplier or if transactions exceed PKR 50,000 and are not paid via a proper banking channel.
- Fake or fraudulent invoices, or those from blacklisted suppliers, are not admissible.
Specific Exclusions: Input tax adjustments are prohibited for:
- Certain goods like vehicles, office equipment, building materials, and utilities used for non-business purposes.
- Services used in exempt or reduced-rate services.
- Transactions not routed through official business bank accounts.
Mixed Services:
- For businesses dealing with both taxable and non-taxable services, input tax claims are proportionally restricted to the taxable services.
Special Cases:
- Adjustments are not allowed for input taxes on reduced-rate goods or services used in providing standard-rated taxable services.
- Goods or services acquired more than six months before the provision of taxable services cannot have their input taxes claimed.
Notification-Based Inadmissibility:
- The Management Committee can notify additional goods or services that are ineligible for input tax claims.
Prohibitions for Non-Registered Persons:
- Only registered persons can claim input tax adjustments on goods or services used for taxable services.