Businesses dealing in taxable goods run into the Sixth Schedule sooner or later — it’s the part of the Sales Tax Act, 1990 that determines which goods are exempt from sales tax entirely.
What the Sixth Schedule Actually Covers
The Sixth Schedule lists goods that are exempt from sales tax under Section 13 of the Sales Tax Act — meaning no sales tax is charged on their supply or import, unlike zero-rated goods (Fifth Schedule) where tax is charged at 0% but input tax can still be claimed. Exempt goods generally don’t allow input tax adjustment at all.
Categories of Goods Typically Covered
- Basic food items — certain unprocessed agricultural produce, live animals, and specified essential foodstuffs.
- Medicines and pharmaceutical raw materials — specified drugs and inputs used in their manufacture.
- Educational materials — books and specified printed educational materials.
- Agricultural inputs — certain seeds, fertilizers, and pesticides used in farming.
The exact list is long, specific, and revised periodically through Finance Act amendments — always check the current Sixth Schedule text on FBR’s official Sales Tax Act publication rather than relying on a general category description, since exemption status can change year to year for specific items.
Exempt vs. Zero-Rated: Why the Distinction Matters
This trips up a lot of businesses. If your goods are:
- Exempt (Sixth Schedule) — you don’t charge sales tax on sales, but you also generally can’t claim input tax credit on your purchases related to that exempt supply.
- Zero-rated (Fifth Schedule) — you charge 0% tax on sales, but you CAN claim input tax credit — a materially better position if you have significant input costs.
Misclassifying your goods as exempt when they’re actually zero-rated (or vice versa) directly affects your input tax claims and can trigger FBR queries during audit.
What This Means for Your Business Registration and Filing
If you deal exclusively in Sixth Schedule exempt goods, you may not need sales tax registration at all, depending on your specific activity. If your business deals in both exempt and taxable goods, you’ll need to apportion input tax correctly between the two categories on your sales tax return — a common source of filing errors.
Frequently Asked Questions
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