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The health and pharmaceutical industry are a crucial aspect of public interest; therefore, governments are careful to tax the sector in a fair manner. GST on Pharmaceuticals has been designed to make the essential medicines available at an affordable rate and would also retain tax compliance throughout the distribution chain. It is important for manufacturers, distributors, hospitals, and pharmacies to be aware of what pharmaceuticals and medical supplies are exempt versus taxable. 

In this blog, we will discuss GST on Medicines, exemptions, and tax rates under business. 

 

Overview of GST 

Launched in 2017, GST has effectively replaced several indirect taxes, thereby simplifying the supply chain for pharmaceuticals. The GST on medicines, moreover, is aimed at ensuring that essential and life-saving medicines remain within easy reach while charging normal rates for others. Before the 2025 reforms, the rates stood at levels of Nil, 5%, 12%, and 18%. The most recent novelty of GST on medicines is an evolution toward a much simpler system, with the majority now sitting at 5% and greatly expanded exemptions. 

These were made to ease the burden on patients, particularly as they battle long term ailments and diseases including cancer, diabetes and rare diseases. Reforms also address inverted duty structures helping manufactures and distributors under the GST in the pharma sector. 

 

Current GST Rates on Medicines 

Nil (0% GST): Applicable to only lifesaving and vital drugs. Some 36 drugs (including 33 previously at 12% and 3 at 5%) would be completely exempt. They include treatments for cancer, rare genetic conditions, HIV, TB and serious cardiovascular disease. Examples include: 

• Drugs used in the treatment of cancer (e.g., some targeted therapies). 

• Drugs that treat rare diseases such as Agalsidase Beta, Imiglucerase and Eptacog alfa (activated recombinant coagulation factor VIIa). 

• Vaccines under government tenders, human blood derivatives and contraceptives. 

5% GST: Current normal rate for most drugs and formulations, down from 12%. This includes: 

• Diabetes medications, hypertension drugs, anti-malarial and common formularies. 

• Allopathy, Ayurveda, Unani, Siddha and Homoeopathy and bio-chemic drugs. 

• Oral Rehydration Salts, insulin and most over the counter (OTC) medicines. 

• This flat rate eases compliance and minimizes costs of regular medical needs. 

Higher tax rates (18%): Applicable to over-the-counter items such as nicotine gums for quitting smoking or some health supplements which do not fall under core medicines. 

 

Taxability and Exemptions 

Medical equipment and devices also end up gaining from the GST reductions on healthcare and medicine: 

• No GST: Sale of healthcare services (such as patient care, consulting physician visit). Supply of drugs and consumables provided during In-patient treatment is treated as composite supply and falls under exempt category. 

• 5% GST (reduced from 12-18%): 

• Bandages, gauzes, dressings and disposable surgical. 

• Diagnostic kits, reagents and gluco meters and test strips. 

• Oxygen for medical use, thermometers, surgical instruments, and virtually all medical/dental/veterinary equipment. 

• Corrective spectacles and goggles. 

It promotes preventive care and diagnostics as these reductions expand the scope of the health sector in GST rates, making it more accessible. 

 

Impact on the Pharma Sector and Consumers 

The GST on pharma sector has seen positive effects:  

Reduced inputs on account of the solution to inverted duties. 

So much for being able to go into business and have all the states competing rates of tax. 

No compulsory recall/re-labelling of pre-September 2025 stock, helping to facilitate a smooth transition. 

In terms of consumers, the new GST on medicines means prices will fall directly 12% tax over a medicine strip currently has come down to 5%, providing considerable savings for patients with long-term treatments. 

Hospitals and pharmacies are allowed to take the input tax credit (ITC) on taxable supplies and not on exempt supplies. Expired medicines require ITC reversal. 

 

New GST on Medicines: What Businesses Should Know 

The new GST on medicines rules focuses on transparency, correct billing and right input tax credit utilization. Pharma businesses must: 

• Stay updated with the all new GST notifications 

• Review product classifications regularly 

• Documentation and filing of GST needs to be precise 

It’s important that you don’t miss out on updated GST rules, as the penalties can be financial and legal. 

GST Guidance by CBM Consultants 

CBM Consultants can assist your pharmaceutical business to efficiently control GST on medicines through properly classifying products, applying the right GST rates, and utilizing sales tax exemptions. We are engaged in processing GST registration along with return filings and its supporting due diligence systematically with the reduction of input tax credit including raw materials, import duties and services. By keeping abreast of the latest changes in regulations, GST reduction on healthcare and medicines and new GST notifications, we help pharma companies to ensure compliance, reduce risks during audits or assessments. Also, we enhance tax efficiency so that businesses can concentrate on their core healthcare practices. 

 

Conclusion 

The changing landscape of GST on pharmaceuticals regime focusses on public health, as increased exemptions and lower rates make critical medicines and supplies cost effective. By slashing GST on health and medicines, it not only strengthens its imprint as the “Pharmacy of the World” but also reduces financial stress at home. With GST on Pharmaceuticals, businesses should keep themselves informed based on the official GST announcements for accurate compliance. For patients, this turns into greater access to quality care and a more citizen-centered tax system. 

Textile industry is the backbone of Pakistan economy which constitutes more than 60% to total exports and providing jobs directly or indirectly millions of people. Export-oriented units (EOUs) must sell cheaply in the world market or face disaster. We’ve learned that one of the most impactful domestic forces on their cost structure and cash flow is Sales Tax Regulations. 

In this blog, we will walk you through the existing Sales Tax Rules, decode sales tax basics as applicable to exporters, analyze major sections of the FBR Sales Tax Act and cover important updates made under the Sales Tax Regulations 2025 that textile exporters should not miss.  

 

Sales Tax Basics 

In essence, Sales Tax is a Value Added Tax (VAT) that is imposed under the Sales Tax Act, 1990 by the Federal Board of Revenue (FBR). The standard rate is 17%, however the textile export sector benefits from a special zero-rating regime, once under the Fifth Schedule and now predominantly under the Export-Oriented Sectors (Zero-Rating) Rules as inserted by SRO 209(I)/2024 and amended from time to time. 

In simple terms: 

• Supplies to registered exporters local (spinning to ready fabric) are fully zero rated. 

• Exporters claim zero-rating on their exports under Section 5 to read with Fifth Schedule, or the new EOU system. 

• Refund of input tax paid on purchase of raw material, utilities and machinery etc. 

 

Sales Tax Regulations 2025 

The most significant change in the recent Sales Tax Regulations of Pakistan has occurred through Finance Act 2024, coupled with several SROs towards the end of 2024 and at the beginning of 2025. The concessional zero rating on local supplies of five export sectors (textile, leather, carpets, surgical and sports goods) under SRO 1125(I)/2011 was withdrawn with effect from 1st July 2024. 

Instead, the government initiated a fresh scheme, Export Facilitation Scheme 2025, and a faster refund regime, known as FASTER-Plus, while also introducing special Sales Tax Rules for units registered under Export-Oriented Units. 

Some of the salient features relating to Sales Tax Regulations for 2025 for textile EOU are: 

Mandatory EOU Registration 

All export-based zero-rated entities should now be registered in the Export Facilitation Scheme 2021 (updated till 2025) of the FBR and concerned Export Development Authorities. 

17% Sales Tax on Local Supplies 

Local supplies to EOUs are now being charged 17% sales tax as opposed to being zero-rated. But input tax is fully recoverable/ refundable via FASTER-Plus system within 72 hours (in most cases). 

Deferral of Payment of Sales Tax on Imports 

EOUs would be allowed to import raw material and machinery under DTRE (Duty and Tax Remission for Exports) or the new EFS without payment of sales tax on the condition that bank guarantees/pay-orders are provided. 

Consumption-Based Minimum Tax 

EOUs must pay a minimum value-addition tax of 2–3% on export proceeds if their input tax adjustment is overly excessive to output (a measure to curb fake/flying invoices). 

 

Impact on Textile Exporters 

Positive Impacts 

• The average refund time has been cut down to just under a week, compared with 6‒9 months prior to FASTER-Plus which led to quicker refunds. 
• This makes it easier to manage the operating capital through deferred payment on imports. 
• Sincere exporters with appropriate documents are getting recovery of their inputs in almost real-time. 

Negative Impacts and Challenges 

• Cash Flow Crunch: Regardless of whether refunds are rapid, the imposition of 17% up front on local purchases ties up billions in working capital for large mills. 

• Heavier Compliance Load: EOU registration, e-invoicing, and monthly consumption ratios need strong ERP. 

• Vulnerability of audit and penalties in case input output ratios are raised by the FBR’s AI-based risk engine. 

• Small and medium exporters that do not have robust finance teams are finding the change challenging. 

 

What Textile Export-Oriented Units Should Do? 

• You should register under Export Facilitation Scheme 2025 (EOU) at the earliest. 

• Connect your ERP with FBR’s Digital Invoice Portal. 

• Keep proper records of production and consumption activity to prevent little value-addition tax. 

• Annex-H Monthly without fail (including nil) to remain eligible for FASTER-Plus. 

• If you are a commercial exporter, or Tier-2/3 manufacturer, you may want to have a look at participating in an indirect export scheme. 

Conclusion 

Even as the government targets to clamp misuse of zero-rating regime and broaden the tax base, real textile export-oriented units are now under higher compliance costs and temporary liquidity stress. Anyone who does not quickly adapt to the digital and EOU world will come under increasing pressure of competition. 

Never has it been more important for Pakistan’s textile industry to be up to date with FBR Sales Tax Act changes, notices and circulars. 

Construction has emerged as a growth-oriented industry in Pakistan with its impact extending beyond providing framework for infrastructure, house demand and job creation. Even as we face 2025, it is key for stakeholders to have insights into the tax regime and, more specifically, with respect to GST rates applicable on property developers. Pakistan’s General Sales Tax (GST) or commonly known as sales tax on services, is the major guiding factor to control transactions in this domain. This blog discusses the complexities of GST on real estate in 2025, GST rates on construction services and other charges such as income tax on construction services in Pakistan and the service tax rate in Pakistan. Whether you’re a developer, investor or homeowner, these insights will enable you to plan constructively around changing fiscal policy. 

 

Overview of GST in Pakistan’s Construction Sector 

Pakistan’s Goods and Services Tax (GST) regime, administered by Federal Board of Revenue (FBR) and provincial authorities, covers supply of goods and services including in construction and real estate sector. The Pakistani system is a federal goods sales tax at 18% percent and provincial goods sales tax (GST) on services that has varied rates from 15-16%. For the construction industry, the GST focuses more on services such as land development, building construction, and property promotion. 

In 2025, most provinces (Islamabad, Sindh, Balochistan, Khyber Pakhtunkhwa) have a services tax rate of 15%, but Punjab will have a services tax rate of 16%. This rate is for construction services, and reduced rates or exemptions are applicable in case of essential activity or export purposes. The federal 2025-26 budget has incentivized the industry by providing certain incentives, such as lower withholding tax on property transactions, to spur the real estate sector and at the same time expand the tax net.” 

 

GST on Real Estate in 2025 

Real estate GST in 2025 is still focusing on transparency and affordability with no significant changes reported recently in the budgeting. Real Estate deals including plot sales, construction buildings and transfers of developed properties are liable to service tax on the service component. Imported construction materials are taxed under the federal sales tax system at an 18% rate, while local services are charged by the provincial GST. 

For real estate developers, the GST is imposed on development and marketing services that are typically subject to lower rates for housing promotion. In Islamabad Capital Territory, property developers are taxed on ‘services’ according to their land area and type of construction, with differing rates for affordable projects. The 2025 budget eliminated the Federal Excise Duty (FED) on real estate activities, which is likely to have a positive impact on developers’ costs and ultimately end-user pricing. 

Here’s a brief lowdown on whether the new system applies to real estate. 

Transaction Type	GST Rate (2025)	Notes
Land development services (plots)	15% (provincial)	Based on sq. yards; reduced for affordable housing
Building construction services	15-16%	Excludes land value; 18% on imported materials
Property promotion/sale services	Specific rates (e.g., Rs. 10-35 per sq. ft. for builders)	Varies by province and project size
Real estate transfers (resale)	0% (if completed)	No GST on ready-to-move properties

 

GST Rates on Construction Services 

GST on construction services is a provincial subject matter. Construction activities including civil work, subcontract and finish also come under the purview of provincial GST at the standard services tax rate of 15-16 percent in Pakistan. 

By 2025, The FBR has made compliance easier for contractors by making digital invoicing compulsory for all registered concerns. In the case of work-like contracts, he covers both labor and materials supplied through the contractor. There are discounted rates (e.g., 5% on health-related construction), but regular projects receive the full rate. 

Service Type	GST Rate (2025)	Province Variation
General construction (civil works)	15%	16% in Punjab
Sub-contracting (e.g., earthwork)	15%	Exemptions for govt. projects
Finishing services (painting, etc.)	15-16%	18% if materials imported
Affordable housing construction	Reduced (5-10%)	Incentives in budget 2025-26

 

Income Tax on Construction Services  

As GST applies to indirect taxes, in Pakistan income tax on construction services focuses on direct incomes, resulting in double compliance. For 2025-26, builders and developers have gone for a presumptive tax regime under Section 100D of the Income Tax Ordinance wherein gross receipts are taxed and not net income to keep it simple. 

Under this regime: 

• Construction and building sales: 10% of gross receipts 

• Development and sale of plots: 15% of developed plots sold. 

• Aggregate activities: 12% of gross receipts 

This subsequent final tax discharge is a project-by-project measure where advance payments are necessary at plan approval (5% of estimated liability). For non-opted entities, there are progressive slabs up to 35% and a minimum tax of 1% on turnover. 

There’s another layer of withholding taxes: 6% on contracts (12% for non-filers) and up to 4% in property sales. These rates were lowered in the 2025 budget (from, for example, 3% to 1.5% on mid-value properties), providing developers with needed cash flow relief. 

 

Construction Sector Guidance by CBM Consultants  

CBM Consultants supports developers and builders with GST by advising on appropriate tax classification, calculating the tax for construction work, preparing compliant invoices, and handling provincial sales tax registration. We also deal with GST return filing that means to maintain accurate project costing and documentation, for not paying penalties on time compliance. Guided by our professionals, developers can maximize tax planning, ensure they’re not unwittingly breaking any laws and keep cash flow problems to a minimum, all across different types of projects. 

 

Challenges and Opportunities  

Challenges fronting constructions, inflation and cost of materials, competition aggravated with 18% GST on imports. However, there are opportunities in 2025 with lower stamp duties for Islamabad (from 3% to 1%) and CGT simplifications (15% for filers on post-July 2024 acquisitions). Digital offerings from FBR such as the builder tax calculator help with compliance. 

On inputs, property developers can go as high as getting 15% back if they plan their GST early through registered suppliers and correct invoicing. Affordable segments have fewer effective prices for the homebuyer, resulting in increased market size. 

 

Conclusion 

Pakistan’s construction sector aims to contribute 7-8% to the GDP by 2025, learning GST rates on property developers and related taxes is a must. With 15–16% GST on Real Estate (services component) by the year 2025 and presumptive relief in income tax on construction services in Pakistan, it balances revenue considerations with incentives. Developers ought to take advantage of provincial differences in the service tax rate in Pakistan and check FBR’s websites for latest info.