Understanding the Different Schedules of the Sales Tax Act, 1990

The Sales Tax Act, 1990 is the cornerstone legislation governing sales tax in Pakistan. To effectively administer and apply sales tax, the Act uses a series of Schedules. These Schedules classify goods, specify tax rates, exemptions, collection mechanisms, and special treatments. For businesses, tax professionals, and even ordinary taxpayers, knowing the contents of these schedules is critical for compliance.

Different Schedules of the Sales Tax Act

Below is a breakdown of the key schedules under the Act and their implications:

Third Schedule – Tax on Retail Price

• Lists goods taxable at 18% of their retail price.
• If any of these goods are also in the Eighth Schedule, the Eighth Schedule rates apply in addition to retail pricing.
• Examples: cement, bottled water, air conditioners, refrigerators, TVs, bulbs, tube-lights, electric fans.
• Withholding tax is not applicable on these goods.
• Commission expenses exceeding 0.2% of supplies are disallowed unless the recipient is on the Active Taxpayers List.
• Goods taxed under this Schedule are excluded from minimum value addition tax at import stage under the Twelfth Schedule.

Fourth Schedule – Omitted

• This schedule was removed by the Finance Act, 1998, and is no longer applicable.

Fifth Schedule – Zero-Rated Goods

• Specifies goods that are zero-rated (0%), including exports.
• Applies to raw materials, packing materials, sub-components, components, and assemblies imported or locally purchased for making zero-rated products.
• Supplies to duty-free shops also qualify for zero-rating.
• Zero-rating is conditional and subject to Board-prescribed restrictions.

Sixth Schedule – Exempt Goods

• Covers goods exempt from sales tax at import or supply stage.
• Examples include:
  • Specialized medical products (catheters, MitraClip, stents, TAVI/TAVR systems).
  • CKD kits for local manufacturing of electric vehicles (buses, rickshaws, trucks, motorcycles).
  • Supplies by cottage industries and certain fixed assets.
• Exemption applies only under specified conditions.

Eighth Schedule – Reduced Rates

• Provides reduced tax rates with specific conditions.
• If goods appear in both the Third and Eighth Schedules, Eighth Schedule rates apply along with retail pricing.
• Examples:
  • Used clothing and footwear – 5%
  • Natural gas to fertilizer plants – 5%
  • Phosphoric acid for fertilizer companies – 5%
  • Potassium chlorate – 18% + Rs. 60/kg
  • Locally manufactured EVs – 1%
  • Raw materials for pharmaceutical APIs – 1%
  • School stationery – 10%
  • Tractors – 10%
  • Solar photovoltaic cells – 10%

Tenth Schedule – Fixed or Capacity-Based Tax

• Tax collected on production capacity or fixed monthly basis, instead of standard sales tax.
• Example: Bricks are taxed at fixed monthly rates (e.g., Rs. 12,500/month in Lahore, Rawalpindi, Islamabad).
• Includes hollow/solid blocks and kerb stones.
• No input tax adjustment allowed against tax under this schedule.

Eleventh Schedule – Withholding of Sales Tax

• Lays down rates and rules for withholding sales tax by designated agents.
• Exemptions include goods in the Third Schedule and most supplies between Active Taxpayers.
• Examples:
  • 5% withholding on gross supplies from Active Taxpayers.
  • 80% of sales tax withholding on supplies of gypsum, limestone flux, coal to manufacturers.

Twelfth Schedule – Minimum Value Addition Tax at Import

• A 3% value addition tax on most imports.
• Exemptions include:
  • Mobile phones and satellite phones.
  • LNG/RLNG.
  • Used clothing/footwear.
  • Gold, silver (unworked).
  • Goods in the Third Schedule (already taxed on retail price).
  • Plant, machinery, equipment in Chapters 84 & 85.

Thirteenth Schedule

• Like the Seventh Schedule, this is appended to the Act but no details are specified in the provided material.

Perfect Here’s a comparison table that summarizes all the important Schedules of the Sales Tax Act, 1990 (and related excise reference) in a clear snapshot:

Comparison Table of Sales Tax Schedules in Pakistan