Service tax in Pakistan doesn’t work the way most people assume. There’s no single federal “service tax” law — instead, services are taxed by the provinces under their own sales tax on services legislation, while a narrow set of services remain under FBR’s federal umbrella. If you run a business that provides any kind of service, this split is the first thing you need to understand, because it decides who you register with and who you file returns to.
Why Services Are Taxed by the Provinces, Not FBR
After the 18th Constitutional Amendment, taxation of services became a provincial subject. That’s why you’ll deal with the Sindh Revenue Board (SRB), Punjab Revenue Authority (PRA), Khyber Pakhtunkhwa Revenue Authority (KPRA), or Balochistan Revenue Authority (BRA) depending on where your business operates — not FBR, for most services. FBR still collects sales tax on goods and a handful of specific federally-administered services, but the bulk of what people call “service tax” is a provincial sales tax on services.
Who Needs to Register
If your business earns revenue from taxable services — consultancy, advertising, IT services, courier, franchise, construction, event management, and dozens of other categories — you generally need to register with the relevant provincial authority once your turnover crosses the registration threshold set by that authority. Registration thresholds and exact service categories differ slightly between Sindh, Punjab, KP, and Balochistan, so check the specific schedule for your province rather than assuming Sindh’s rules apply everywhere.
Standard Rates
Most provinces apply a standard rate around 15-16% on taxable services, though several categories (IT and IT-enabled services, for example) get reduced rates as low as 3-5% in some provinces to encourage the sector. Rates change with each provincial finance act, so always confirm the current rate for your specific service category before invoicing.
Filing and Compliance
Registered service providers file monthly returns with their provincial authority, similar in structure to FBR’s sales tax return — output tax on services billed, input tax adjustment where allowed, and net payment. Missing filings or late payments attract penalties and default surcharge under the respective provincial sales tax on services act.
Common Mistakes Businesses Make
The most frequent error is treating “service tax” as one national system and registering in the wrong province, or assuming FBR sales tax registration covers services when it doesn’t. Multi-province businesses often need to register separately in each province where they render services, not just where they’re headquartered.
If you’re also registering a business structure, see our business registration guide. For the official provincial rules, check the Sindh Revenue Board or Punjab Revenue Authority websites directly.
