Federal Excise Duty (FED) Explained for Pakistani Businesses

Federal Excise Duty (FED) is a federal tax charged on the manufacture, import or provision of certain specified goods and services in Pakistan. It is administered by the Federal Board of Revenue (FBR) and sits alongside — not instead of — ordinary sales tax on goods. If your business deals in excisable items, you may have to charge and account for FED in addition to GST.

Many business owners confuse FED with sales tax because both are collected by FBR and both appear on invoices. This guide explains what FED is, what it applies to, and how to keep your records straight.

What is Federal Excise Duty?

FED is a duty levied on a defined list of goods and services that the government has chosen to tax at the federal level. Historically, excise duties were used on items such as tobacco, cement, beverages, and certain services. The exact list, and the rate on each item, is set by law and is reviewed in the annual Federal Budget, so it changes from year to year.

The important idea to grasp is that FED is item-specific. It does not apply to everything you sell — only to goods and services that are named as excisable in the law.

How is FED different from sales tax?

Both taxes are federal and both are collected by FBR, but they are separate charges with separate rules:

• Sales tax (GST) on goods is a broad tax applied to most taxable supplies at the standard rate.
• FED applies only to specified excisable goods and services and is charged in addition to sales tax where both apply.

On some items you may end up charging both GST and FED. On many ordinary items you charge only GST. Because the two are distinct, they must be shown and recorded separately on your invoices and in your books.

Key point: FED is a separate line from sales tax. Where both apply, your invoice should show GST and FED as distinct amounts, not merged into one figure.

Who has to deal with FED?

You are likely to encounter FED if your business:

• Manufactures or produces excisable goods;
• Imports excisable goods;
• Provides a service that the law lists as an excisable service.

If none of your goods or services appear on the excise list, FED simply does not affect you and you deal only with the taxes that do apply, such as GST on goods or provincial sales tax on services. Because the list is defined in law and revised periodically, the safest approach is to confirm your specific items with FBR or a tax adviser rather than assume.

FED on services vs provincial sales tax

This is a common area of confusion. Sales tax on services is generally a provincial matter, collected by authorities such as the PRA in Punjab and the SRB in Sindh. However, certain services have historically been brought under federal excise. Whether a particular service falls under FED or under a provincial services tax depends on the current law and where the service is rendered. If you provide services, it is worth reading our guide on provincial sales tax on services alongside this one, and confirming your exact position with the relevant authority.

Filing and record-keeping

Where FED applies, you are expected to:

1. Charge the correct duty on excisable supplies;
2. Record it separately in your sales records;
3. Report it to FBR through the applicable return; and
4. Deposit the duty collected as required.

Because FED interacts with your sales tax reporting, keeping clean, separated records is essential. If duty is merged with GST or left out of your ledgers, reconciling your returns becomes difficult and errors can attract questions from FBR.

Practical tips for staying compliant

• Identify early whether any of your goods or services are excisable, and document it.
• Set up your invoicing so FED is a separate line item from sales tax.
• Review the position each year after the Federal Budget, since rates and coverage can change.
• When in doubt about a specific item or service, ask FBR or a qualified tax adviser rather than guessing.

Frequently asked questions

Is FED charged on top of sales tax?

Where an item is subject to both, yes — FED and GST are charged as separate amounts on the same supply. On items that are not excisable, only the applicable sales tax applies. Always confirm which taxes apply to your specific goods or services.

Does FED apply to every business?

No. FED only applies to the specific goods and services named as excisable in law. Most everyday retail and trading businesses deal with GST rather than FED, but you should still check whether any of your lines are excisable.

How do I know the current FED rate on my product?

Rates and the list of excisable items are set in law and revised in the annual budget. Rather than relying on an old figure, confirm the current rate for your specific item with FBR or your tax adviser.

Iris Accounts records federal excise duty as a separate line from sales tax and keeps it reconciled with your returns, so businesses dealing in excisable goods and services stay organised without extra effort.