GST Rate in Pakistan: Standard and Reduced Rates Explained

One of the first questions any business owner asks about sales tax is simply: what rate do I charge? In Pakistan the headline answer is the standard GST rate of 18% on goods — but that is not the whole story. There are reduced rates, zero-rated supplies, exempt supplies, and an extra further tax in certain situations.

This guide lays out the rate structure clearly so you know which category your goods fall into and where to confirm the exact rate.

The standard rate: 18%

For most taxable goods, sales tax is charged at the standard rate of 18%, administered federally by FBR. Unless your goods fall into a specific reduced, zero-rated or exempt category, this is the rate that applies. It is calculated on the value of the supply and shown as output tax on your invoice.

Reduced rates

Some goods are taxed at reduced rates below the standard 18%. These are set by FBR for specific categories of goods and can change from time to time through the Finance Act and statutory notifications. Because the list of reduced-rate items and their exact rates is updated periodically, you should not assume a rate from memory — check the current position for your specific goods with FBR or your tax adviser.

Zero-rated supplies

A zero-rated supply is taxable, but at a rate of 0%. The most common example is exports. Crucially, because the supply is still within the tax net, you can generally still reclaim the input tax on costs relating to it. Zero-rating is genuinely favourable — you charge no tax but keep your input tax recovery. We cover exports specifically in export invoices and zero-rated sales.

Exempt supplies

An exempt supply sits outside the sales tax altogether. You charge no output tax, but you generally cannot reclaim the input tax on related purchases. This is the key difference from zero-rating, and mixing the two up is a common and costly mistake. Our guide to zero-rated vs exempt supplies explains why the distinction matters so much.

Quick comparison of the categories

Further tax on unregistered buyers

Separate from the rate on the goods themselves, a further tax of 3% generally applies when you make a taxable supply to a buyer who is not registered for sales tax. This is added on top of the normal sales tax and is not a substitute for it. We explain the details in further tax on unregistered buyers.

What about services?

The rates above apply to goods, which are federal. Sales tax on services is provincial and each authority sets its own rate — for example Punjab (PRA) and Sindh (SRB) apply their own standard service rates, which differ from the federal goods rate. If you provide services, look to your provincial authority rather than the 18% federal figure. See sales tax on services vs goods for the full picture.

How to be sure you are using the right rate

Rates and classifications change with each budget cycle and through notifications during the year. The safest approach is to:

• Identify exactly which category your specific goods fall into;
• Confirm the current rate with FBR or a tax adviser rather than relying on last year's figure;
• Maintain the correct rate against each item in your accounting software so it is applied consistently;
• Review your rates whenever a new Finance Act takes effect.

Frequently asked questions

What is the standard GST rate in Pakistan?

The standard sales tax rate on goods is 18%, administered by FBR. Some goods carry reduced rates, and exports are typically zero-rated.

Is zero-rated the same as exempt?

No. Zero-rated means taxable at 0% with input tax generally reclaimable; exempt means outside the tax with input tax generally not reclaimable. The difference affects how much tax you can recover.

Do services use the same 18% rate?

No. Services are taxed provincially, and each provincial authority sets its own rate, which differs from the federal goods rate. See our FAQs for more.

Iris Accounts lets you set the correct rate against every item — standard, reduced, zero-rated or exempt — so the right GST is applied and reported on each invoice automatically.