Sales Tax on Services vs Goods in Pakistan: What's the Difference?

One question quietly decides how your sales tax works in Pakistan: are you supplying goods or services? The answer determines who you register with, which return you file, which portal you use, and what rate you charge. Getting this split right is fundamental — and businesses that do both need to manage two systems at once.

This guide explains the goods-versus-services divide, why it exists, and what it means in practice for registration, returns and rates.

The core rule: federal goods, provincial services

Under Pakistan's constitutional arrangement:

• Sales tax on goods is federal — collected by the Federal Board of Revenue (FBR);
• Sales tax on services is provincial — collected by each province's own revenue authority.

So a business selling physical products deals with FBR, while one providing services deals with its provincial authority. This is not a minor administrative detail — it is the single biggest structural fact about sales tax in Pakistan, and it underpins our beginner's guide to sales tax.

Who administers services in each province?

Rates can change, and reduced rates apply to certain services, so confirm the current rate for your specific service with the relevant authority. The standard federal rate on goods, by contrast, is 18% — see our GST rate guide.

Separate registration for each

Because goods and services are handled by different authorities, they need separate registrations:

• For goods, you register with FBR and obtain an STRN;
• For services, you register with the provincial authority (or authorities) where you operate.

A business that sells goods and also provides services may need to be registered with FBR and with one or more provincial authorities at the same time.

Separate returns and portals

Each authority has its own return and its own portal. That means:

• Your FBR sales tax return for goods is filed on FBR's system;
• Your provincial service tax return is filed on that authority's system;
• If you operate across provinces, you may file with more than one provincial authority.

Filing your FBR goods return does not discharge your provincial service obligations, and vice versa. They run in parallel, each on its own monthly cycle.

Why the distinction can get tricky

Most of the time it is obvious whether you are selling a product or providing a service. But some businesses blur the line — for example a supplier who both sells equipment (goods) and provides installation or maintenance (services). In mixed cases, each element may be taxed under its respective regime.

Because the classification of specific activities and any cross-province rules can be nuanced, it is worth confirming the treatment of your particular supplies with the relevant authority or a tax adviser rather than guessing. If you operate in more than one province, our note on cross-province services and input tax is a useful companion.

What this means for your bookkeeping

If you handle both goods and services, your accounting has to keep the two streams distinct so that:

• Federal output tax on goods is reported to FBR;
• Provincial output tax on services is reported to the right authority;
• Input tax is claimed correctly under each regime;
• Each return is prepared from clean, separated data.

This is exactly the kind of complexity where good software earns its keep, keeping the goods and services sides clearly apart.

Frequently asked questions

Can one business be registered for both goods and services?

Yes. A business supplying both may hold an FBR registration for goods and a provincial registration for services, filing separate returns for each.

Does FBR Digital Invoicing cover services too?

FBR Digital Invoicing relates to federal sales tax on goods. Services are provincial and reported separately with the relevant authority under its own rules.

Which rate do I charge on services?

It depends on your province — for example PRA is 16% and SRB is 13% at the standard rate. Confirm the current rate for your specific service with the relevant authority. See our FAQs for more.

Iris Accounts keeps your goods and services sales tax clearly separated, so federal invoices go to FBR and provincial service tax is tracked for the right authority without the two getting tangled.