Services Tax for Consultants, IT Firms and Agencies in Pakistan

Consultants, IT firms, software houses, marketing agencies and other professional service businesses in Pakistan often get their sales tax wrong for one simple reason: they assume it works like tax on goods. It does not. Because you sell services, your sales tax is provincial, charged by the province where the service is rendered — through authorities such as the PRA and SRB — not through FBR's federal GST on goods.

This guide walks service businesses through what that means day to day, from choosing the right authority to handling clients in multiple provinces.

Your tax is provincial, not federal

The first thing to internalise: sales tax on services is administered by the provinces. Depending on where you render your services, that could be the Punjab Revenue Authority (PRA), the Sindh Revenue Board (SRB), the Khyber Pakhtunkhwa Revenue Authority (KPRA) or the Balochistan Revenue Authority (BRA). Services in the Islamabad Capital Territory are taxed under the FBR-administered ICT ordinance. Each has its own registration, rate, return and portal. For the overview, see provincial sales tax on services in Pakistan.

Standard rates for service businesses

The standard services rates by province are:

These are standard rates. IT and certain other services sometimes qualify for reduced rates in particular provinces, and rates can change with each provincial Finance Act. IT and IT-enabled services in particular have often had special treatment, so confirm the current rate and any conditions for your exact service with the relevant authority.

Key point: do not assume one rate for all your work. The rate depends on the province and the specific service — and IT services may be treated differently from general consultancy.

Where is your service "rendered"?

For an agency or software house, the hardest question is often where a service counts as rendered — especially when the work is done remotely for a client in another province. The place of rendering decides which authority applies, and each authority has its own rules for cross-province and remote delivery. Our guide on which provincial authority to register with helps you reason it through, but for genuinely ambiguous cases you should confirm with the authorities or a tax adviser.

Serving clients in multiple provinces

Many consultancies and agencies serve clients nationwide. If you render taxable services in more than one province, you may need to:

• Register with each relevant authority (for example, both PRA and SRB);
• Apply the correct rate for each province and service;
• File a separate return with each authority on its own schedule;
• Keep your records split by province.

And because input tax generally cannot be freely adjusted across provinces, the costs of running multi-province work need careful attribution — see cross-province services and input tax.

Practical issues for IT firms and agencies

Exports of IT services

Many software houses and freelancers export services to overseas clients. Export of services can be treated differently from local services, and provinces have specific rules and conditions for it. Do not assume the local rate applies to export work — confirm the treatment for your situation with the relevant authority.

Mixed work: services plus goods

If you also sell products (say, hardware alongside IT services), remember that goods fall under FBR's federal GST while the services fall under the provincial authority. Keep the two clearly separate on invoices and in your books.

Retainer and milestone billing

Agencies often bill on retainers or milestones. Make sure the tax is applied correctly at the point each taxable service is rendered and invoiced, and that your records tie each invoice to the right province.

Frequently asked questions

Do IT firms pay FBR sales tax?

For their services, generally no — services are provincial, so IT firms deal with the relevant provincial authority. FBR sales tax applies to goods. If you also sell goods, that part is federal.

My clients are all over Pakistan. Do I register everywhere?

Potentially in each province where you render taxable services. Confirm the place-of-rendering rules and registration requirements with each relevant authority.

Are IT services taxed at the standard rate?

Not always. IT and IT-enabled services sometimes have reduced rates or special treatment that varies by province and changes over time. Confirm the current rate for your service with the relevant authority.

Iris Accounts supports provincial services tax per authority, so consultants, software houses and agencies can invoice at the right rate, split records by province, and file each authority's return with confidence.