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In Pakistan the word GST for smaller companies is a little confusing because many businessmen, tend to confuse it with the old provincial Sales Tax on Services as well as with the federal Goods and Service Tax (GST) on goods. GST on goods is administered by FBR as of 2025 while sales tax on services is collected by provincial revenue authorities (PRA, SRB, KPRA, BRA, AJK) assumes that this will also be handled regionally. But most SMEs must contend with both regimes, and the compliance burden is real. 

This ultimate guide breaks down what GST means for small businesses in Pakistan, the advantages it offers, how to register, how to file and some of the day-to-day practical issues the SME faces. 

 

What is GST in Pakistan? 

GST (Goods and Services Tax) is a federal sales tax that applies to the supply of goods in all Pakistan, including imports into such area, but excludes exports therefrom. GST is a value-added tax and is reduced at all ITCs of inputs to produce the product even though it lengthens the supply chain. 

Services are taxed at the Provincial Sales Tax level (which most often is referred to as GST). Rates vary: 

Sindh and Balochistan – 13 to 15% (based on the services) 

Punjab and Khyber Pakhtunkhwa – 16% 

AJK – 16% 

 

Who Needs Sales Tax Registration in Pakistan? 

You must register if: 

• Your annual sales of goods show PKR 100,000,000 or more (FBR GST) compulsory. 

• You have an annual taxable services turnover above the provincial thresholds (in general PKR 30 to 50 million depending on the province), obligatory. 

• You are operating in some sectors (perhaps restaurants, beauty salons, freight forwarders etc.) even below the threshold, compulsory. 

• You are opting for input tax credit, and you want to be included in the Active Taxpayer’s List (ATL). 

 

How to Register for GST? 

Registration of GST in Pakistan is a structured and digitalized process explained on the FBR portal. 

Step-by-Step Guide: 

Register in the FBR IRIS portal. 

Apply GST Registration for company or proprietorship. 

Submit documents that may be needed (ID Card, business bank account statement, rental agreement or ownership document). 

Upload biometric verification (if required). 

Once it is verified, you will download your GST certificate FBR from the IRIS profile. 

Upon registration, you can also learn how to check GST number in Pakistan online through FBR GST taxpayer portal or IRIS dashboard. 

 

Opportunities for Small Businesses Under the GST System 

Enhanced Credibility and Market Access 

It is through proper Sales Tax Registration that small businesses are included as documented economy. This is increasing brand value and enabling SMEs to join the larger corporate clients that demand a GST-compliant vendor. 

Input Tax Adjustments 

Registered SMEs may charge input tax credit on the purchases, which will markedly decrease their total business cost. This allows for competitive price points while still achieving profitable margins. 

Access to Government Tenders 

A huge number of government tenders require GST registered firms to undertake the projects. A valid GST certificate for FBR opens doors to new projects, partnerships, and opportunities. 

The Emergence of E-Commerce and Online Trading 

With the increasing popularity of online marketplaces, most platforms now mandate that sellers should have a GST registration. This is why GST for small business online is a proactive move for SMEs seeking broader audiences locally and internationally.  

 

Compliance Challenges Faced by SMEs 

With its advantages, the GST structure also comes with small business problems related to effective compliance: 

Scarcity of Knowledge about GST Rules and Percentages 

Knowing how to apply for registration with GST, the format and rates of invoice are some of the daunting challenges a new business often faces. Misunderstandings and misinterpretations result in notices, penalties, and exposure to audits. 

Complex Documentation and Records 

SMEs would have to keep comprehensive records of sales and purchases, tax invoices as well as reconciliation statements for reconciled against monthly GST returns. 

Frequent Changes in Regulations 

As changes are made to the GST rules by FBR, it is important for businesses to be informed. It’s tough for SMEs to do this without professional accounting help. 

Timely Filing of GST Returns 

The filing of GST needs intricate details and time-bound applications. Small businesses frequently find themselves at a loss regarding appropriate financial management and the right employees. 

 

Why SMEs Must Prioritize GST Compliance? 

For many small businesses, GST compliance becomes the foundation for: 

• Transparent financial reporting 

• Enhanced cash flow resulting from the claims for deletion of input tax 

• Higher probability of winning corporate business 

• Better access to e-commerce platforms 

• Consistently secure and protect your business for tomorrow’s growth 

Small and medium businesses not focusing on GST compliance are at risk of losing business opportunities and may be penalized by FBR as well. 

 

Practical Tips to Survive GST as a Small Business 

• Use an online accounting system which has FBR integrated. 

• Issue tax invoices properly (serial number, buyer NTN/CNIC mandatory above PKR 50,000). 

• File returns on time even if nil. 

• Keep digital records for at least 6 years. 

• You can retain a part-time tax practitioner. 

 

Conclusion 

GST for Small Businesses is not just about tax compliance, it’s a business strategy to enable SMEs in their growth journey, formalize businesses and become an integral part of Pakistan’s evolving economy. With basic knowledge of GST, lawful registration and responsible filing will reveal a treasure trove for small businesses in the form of new lucrative opportunities by adequately addressing the compliance hurdle.  

If you’re an entrepreneur starting or running a business in Pakistan, the one term you’ll come across quickly is GST. Goods and Services Tax (GST) previously called General Sales Tax in Pakistan is something you must understand if you’re a business owner or an accountant because it has a direct impact on your pricing, cash flow, compliance and profits.  

In this ultimate guide, we would go through everything a business owner in the country must know about GST in Pakistan from what does it stand for to registration, rates, filing and some of the practical tips. 

 

What is GST in Pakistan? 

GST is an abbreviation for Goods and Services Tax. In Pakistan, it is known as Sales Tax and is being regulated by the Sales Tax Act, 1990. But in all practical terms as well as on the FBR website, it is called GST. 

In simple terms, GST in Pakistan is an indirect value added tax which is imposed on supply of goods and services every time the transaction took place up to the level when it reaches the ultimate consumer and a credit can be taken for any input tax paid. 

Present Standard GST Rate (2025): 18% on almost all product supplies (some goods are zero-rated, whereas others attract lower rates like 0%, 5%, 10%, or the maximum rate of up to 25%). 

 

Types of GST 

Pakistan essentially follows a single GST system, but it is divided based on jurisdiction and nature of supply: 

Type	Authority	Applicability	Rate
Federal GST	Federal Board of Revenue (FBR)	Goods + Services (except those under provinces)	18% (standard)
Provincial Sales Tax on Services	Punjab (PRA), Sindh (SRB), Khyber Pakhtunkhwa (KPRA), Balochistan (BRA)	Services only (varies by province)	13–16% (mostly 15–16%)
GST on Goods	FBR	All taxable goods imported or supplied in Pakistan	18% (standard)
Zero-Rated Supplies	FBR	Exports, certain food items, medicines, etc.	0%
Exempt Supplies	FBR / Provincial	Certain essential items and services	Nil

 

Who Needs GST Registration in Pakistan? 

You need to get Sales Tax Registration (commonly known as GST Registration in Pakistan) if: 

• Your annual taxable turnover is equal to or more than PKR 100 million (for manufacturer) or in other cases, there is no threshold prescribed.  

• You’re an importer, exporter, distributor, reseller or dealer  

• You have made supplies that would be zero-rated (exports) 

• You voluntarily want to claim input tax adjustment. 

Even if your turnover is under the threshold, you should strongly consider registering if you wish to get back the GST that you pay on purchases (input tax credit). 

 

Step-by-Step Registration Process  

1st step: Go to FBR GST Portal:http://iris.fbr.gov.pk

2nd step: Click on “Registration” then “New Registration (Form STR-1)” 

3rd step: Fill in: 

• CNIC / NTN 

• Business details 

• Bank account (IBAN) 

• Photos of premises and details of rent agreement/ownership proof 

• Utility bills 

4th step: Submit the application.

5th step: Biometric verification to be available at the nearest FBR office or NADRA e-Sahulat franchise. 

6th step: Get GST Registration Certificate (Normally in 2–7 Days) 

7th step: Once registered, you will be provided with a Sales Tax Registration Number (STRN) which should be shown on all invoices. 

 

Key GST Compliance Requirements 

Upon registration, the businesses are subject to the following: 

Monthly GST Returns 

Lodge on IRIS monthly sales tax returns stating: 

Tax Paid on Purchases (GST paid) 

GST payable (Sales GST) 

Net payable tax (if any) 

Issuing Sales Tax Invoices 

All supplies subject to sales tax must be supported by a valid FBR-compatible invoice which indicates the GST charged. 

Proper Bookkeeping 

For the purpose of audit and compliance, such records on purchases of sales input tax and output tax need to be accurate. 

Timely GST Payments 

If filed late or payment is not received on time, it could lead to fines, interest fees, and an audit. 

 

CBM Consultants in Action: 

CBM Consultants assist businesses with their GST by making sure all regulations are met; returns are filed correctly and documented properly. We deal with GST registration, file monthly returns and records, calculate input/output tax amounts, do bookkeeping as per compliance. Our experts also advise businesses on GST regulations, provincial exceptions and audit necessities for less risky penalties and efficient structuring of tax operations. 

 

Common GST Mistakes 

• Not displaying STRN on invoices (penalty up to PKR 50,000)  

• Issuing fake or flying invoices 

• Not claiming legitimate input tax 

• Mixing personal and business expenses (input withheld) 

• Non or delayed filing of returns 

 

GST Checklist for Businesses 

• Once you commence taxable supplies, take your GST registration at once 

• Issue proper tax invoices displaying STRN, description value, and GST amount separately. 

• Retain full records of purchases and sales for 6 years minimum. 

• Reconcile input tax every month. 

• Monthly GST returns filing on or before the 15th (monthly) of next month. 

• Monitor budget changes (reviewed annually with possible rate changes every June). 

 

Conclusion 

It is fundamental to know the GST in Pakistan for each business whether it is small or large. Right from its full form to how to register on the GST portal, to be compliant is to run a business without hassles and needless expenses. Amid the constant changes in tax laws, keeping track of and being updated are essential to avoid penalties or making the most input tax benefits. 

In the constantly progressing field of taxation, Capital Value Tax retains an important role for the government to raise money from high value properties. Whether you’re someone selling or buying a house, hoping to make an investment in vehicles, planning on making an equity investment to make money. Also, you are wanting to start your own business and have the cash now, Capital Value Tax is something you need to understand before engaging in major financial decisions. This blog delves into the basics of Capital Value Tax and zooms in on its application in Pakistan. In this blog, we will discuss Capital Value Tax Act, how total capital value is included in the property tax calculation and answer all related questions such as whether capital value tax refundable in Pakistan. By the end, you’ll have some key points to aid in making well-informed decisions. 

 

What is the Capital Value Tax? 

At its most basic level, Capital Value Tax is one of those things attached to capital assets or on any purchase or transfer that only occurs once, such as land (real estate), vehicles, stocks and shares, even foreign air fares. While income tax on earnings, Capital Value Tax focuses on the underlying value of assets as a method to provide equitable wealth sharing and fill government funds. It’s conceived to tax revenue at the time of transfer of ownership and ensure that high net worth individuals don’t pay less than their fair share, relative to what they hold in assets. 

Variations of the Capital Value Tax are prevalent worldwide, however in countries such as Pakistan where investment is largely asset-driven, it holds far-reaching implications for real estate and automotive. Rates of tax are generally low, with an average base cost ranging from 1-2% of the fair market value of the asset being a simple but effective rate to apply. 

 

An Overview of Capital Value Tax 

Capital Value Tax has been again introduced through Finance Act, 2022 reintroduced back from the original commencement in June 1989. It is collected by the Federal Board of Revenue (FBR) and applies to various assets, such as:  

• Immovable Property: At 1% where value tax exceeds PKR 100 million. 
• Motor Vehicles: 1% on invoice value of high or luxury model automobile. 
• Shares and Securities: Applicable when purchasing shares. 
• Foreign Assets: 1% of value more than PKR 100 million after converting into Pakistani rupees at the current exchange rate.  

This tax applies even to persons, businesses and corporations buying or leasing assets for periods exceeding 20 years. For citizens, it applies to assets held at home and abroad; for non-residents only assets in Pakistan.

 

Legal Framework  

The Capital Value Tax Act is not an independent law, but it forms part of Section 8 of the Finance Act, 2022 along with the Capital Value Tax Rules, 2022 (SRO 1797(I)/2022). This framework outlines: 

• Declaration Requirements: Asset owners need to make an annual declaration of their holdings by 30th September with Capital Value Tax due within 30 days. 
• Collection Mechanism: Tax is collected at the registration point (e.g., by the excise departments for vehicles or sub-registrars for property). 
• Exemptions: There are exclusions for agricultural land, inherited property, and some government securities. 

The Act stresses transparency and requires valuation based on fair market rates ascertained by the FBR or provincial valuation committees. Recent changes in 2025 have clarified rules on foreign assets and settled disputes over the currency conversion issue. For deeper dives, the FBR’s official guides offer examples, and they list potential appeal processes. 

 

What is the Total Capital Value in Property Tax? 

A point that is often misunderstood surrounding broader property taxation is the role of capital value. In Pakistan, the annual property tax (tax levied annually by a Provincial authority) is mutant of Annual Rental Value at 5-15% of the estimated rent per annum. in place of the Capital Value system. But Capital Value Tax applies here as a federal one-time levy on total capital value, which is the fair market value (FMV) of property at time of acquisition.  

In property tax context, to estimate full capital value: 

• Calculate FMV: Refer to FBR approved valuation tables or get your own appraisals. For urban properties, the declared sale price or government-notified rate is frequently considered. 
• Apply Threshold: Application of CVT applies only where the value exceeds PKR 100 million.  
• Calculate Tax: 1% of FMV (for example, PKR 150 million property has a CVT of 1.5 million) 

The total capital value will, however, not be directly part of the ongoing property tax but will come into play through withholding taxes, for example, 1% advance after sales. For instance, in Punjab, urban property tax could reach 5% of Annual Rental Value, CVT makes up one additional level for the high value transactions. Calculations such as the carried out through tools such as Sindh Board of Revenue’s online calculator can give an accurate idea of these figures.  

Asset Type	Threshold for CVT	Rate	Example Total Capital Value Tax
Immovable Property	> PKR 100M	1%	PKR 200M property: PKR 2M
Motor Vehicle (Heavy)	Any value	1-6%	PKR 5M SUV: PKR 50K-300K
Shares	Varies	0.1-1%	PKR 50M portfolio: PKR 50K-500K

 

 

Is Capital Value Tax Refundable? 

Yes, Capital Value Tax is refundable in Pakistan subject to certain conditions. It is as per the Capital Value Tax Recovery and Refund Rules under the Finance Act of 2022. Refunds are available if: 

• Overpaid: Taxes paid in error based on an over-valuation or double taxation. 

• Exemptions Applied Retroactively: For example, an asset becomes exempt only after payment. 

• Statutory Amendments: The withholding taxes are deductible from the final CVT liability. 

For claiming the refund, form CVT-03 may be filed before FBR within six months of payment and accompanied with proof of value such as valuation reports. The processing time is 3 to 6 months, and interest of 0.5% is charged on delays. Refunds are not automatic for normal transactions, but proactive appeals have secured dismissals at ATIR e.g. 2025 ruling, release in respect of certain foreign assets. As with any tax matter, you should consult with a tax adviser to avoid pitfalls. 

 

Capital Value Tax Guidance by CBM Consultants 

CBM Consultants provide complete advice on Capital Value Tax (CVT) from start to finish, so there is no question that your property transaction complies fully with provincial tax regulations. We assist with accurate total capital value calculation, so clients can ascertain the correct amount of Capital Value Tax due, and complete drafting all necessary documentation for registration or transfer. We help with reviewing valuation tables, determining applicable exemptions, preventing paying too much, and refunding claims on any errors or duplicate payments. With CBM Consultants, you receive accurate tax calculations, on-time filing, and seamless communication with the provincial authorities keeping your property transactions transparent, compliant, and headache-free. 

 

Key Insights 

So, here are 5 action takeaways on Capital Value Tax: 

Plan for Big Purchases: 

Account for CVT, binding on assets over thresholds. 

Use Digital Tools:  

FBR’s Iris for declarations to avoid penalties. 

Understand Interlinks: 

CVT is in addition to CGT (15% for gainers) and stamp duty (up to 2%). The trio which together makes for a tax ecosystem cast around real estate. 

Stay Tuned:  

Keep an eye on FBR notifications for 2025 budget adjustments in terms of rates. 

Look for Exemptions: 

 Inherited or farm property frequently may be exempted to reduce your load. 

 

Conclusion 

So, Capital Value Tax isn’t just a measure of fiscal responsibility. It’s a glimpse into the life of Pakistan’s drive towards greater tax base. By understanding Capital Value Tax,, the Capital Value Tax Act and nuances, such as refunds and how capital value is calculated, you have a defense. If you are seeking tax counsel on a transaction, contact immediately a licensed tax professional.