Yearly Archives: 2025

In the fast-emerging IT industry of Pakistan, exporters influence the economy to a large extent by developing software. They are offering digital solutions and exporting IT enabled services. But the tax world can be difficult to get your head around. It is important for exporters to know about IT and sales tax in order to be compliant, minimize costs and penalties. In this blog, we cover basics such as sales tax on IT in Pakistan, exemptions available for exporters and some practical advice around your calculations. Whether you’re exporting software or offering IT support services online, being informed can help you maximize the benefits of these tax measures. 

 

Overview of Sales Tax on IT 

Sales tax in Pakistan is imposed under the Sales Tax Act, 1990 and on services it is controlled by Provincial Ordinances. The Federal side is controlled by the Federal Board of Revenue (FBR), and provinces operate service-related taxes. The IT and IT enabled service sectors includes software development, data processing and call center operations. The taxation will depend on location of the supply and nature of service. 

In the case of ICT, IT services tax was available at 16% from July 2015 but later it had to be brought down to 5% by making another notification. Provincial rates for services typically fall between 15% and 16%, and the combined standard federal sales tax rate on goods is 18%. Crucially, provision within the domestic market of IT services evidently comes under taxable services.

But the point of interest for exporters is how these provisions are to be interpreted in the event of an international transaction. Exports are dealt with differently to promote foreign exchange earnings and are often eligible for zero-rating or exemptions. 

 

Sales Tax on IT Services 

IT services sales tax-effect in Pakistan is mainly for domestics supplies and on lower side for exports. ICT (Tax on Services) Ordinance 2001 also has given a broad definition of IT/IT enabled services, which is made consistent with the Income Tax Ordinance. The seller in the locality of a buyer that is client must charge sales tax for the province at which his business’s location. You can take an example of 16% in case Punjab represents services associated with IT. 

Exporters have at least some good news that exports of IT services and IT enabled services are zero rated. This is the situation countrywide, except for certain exceptions in provinces like Sindh. Would the exporters on PSEB have an added advantage as most exporters don’t need to get FBR sales tax registration for exports? There are also possibilities that related services such as telecom for software exporters may be spared. 

It may be mentioned here that although exports are zero-rated for sales tax purposes, PSEB-registered companies still are subject to withholding tax at a reduced rate OF 0.25% until the year 2026 on export proceeds which is also a final tax under the Final Tax Regime (FTR). 

 

Sales Tax on IT Equipment 

In terms of hardware sales, Pakistan’s IT equipment is sold by importers and suppliers are charged with the sales tax. The general rate for imported goods is 18%. But certain items like computers and laptops are subject to a separate rate. The FBR has raised sales tax on imported computers and laptops to 10% from 5% with effect from the ongoing fiscal as part of revenue generation measures. That’s true at the import level and for companies like IT firms, that cost can rise. 

Exporters have some potential relief. Inputs that are used to carry out export-oriented activities may be eligible for the suspension or refund of sales taxes. In case of the importation of equipment for generation of exportable IT services, exporters are allowed input tax credits or exemptions.

Exemptions and Benefits for IT Exporters 

There are several incentives for exporters in the IT industry to grow. Key exemptions include: 

• Zero Rating on Exports: No sales tax on IT and IT enabled service exports under SRO 590(I)/2017 of ICT and provincial equivalent. 

• Relief for Income Taxes: Income from exports is not taxed if 80% repatriated but is subject to the minimum tax on turnover. A possible transition to a 100% tax credit system could improve the situation. 

• No Registration Necessary: Pure exporters of software or IT services sometimes avoid sales tax registration requirements. 

• Reduction of withholding tax: 0.25% (for ATL listed IT exporters). 

These are part of Pakistan’s effort to encourage digital exports but keep the rules in mind. Keep records of remittances and transact only through authorized dealers. 

 

Compliance Requirements for IT Exporters 

For Sales Tax on IT, exporters must keep in check: 

• Appropriate sales tax registration (federal, provincial as applicable) 

• Proper invoicing indicating zero-rated export of services 

• Retention of contracts with foreign customers 

• Evidence of foreign currency remittance 

• Filing sales tax returns on time 

Non-compliance could lead to the denial of your zero-rating exemptions and penalties, including an audit. 

 

Conclusion 

For Pakistan IT exporters, the correct application and understanding of sales tax on IT. Potential statues can convert possible liabilities into assets. The system ensures global competitiveness through zero-rated exports and specified exemptions. Keep an eye out for FBR notifications as policies will likely continue to develop recent change. The laptop tax increase are good examples of why vigilance is necessary. By complying and benefiting from advantages, exporters can concentrate on innovation and expansion. If you are an IT exporter, check your current operations to make sure they’re not overpaying. 

The hospitality industry in Pakistan is vital for the economy, impacting tourism and dining. However, navigating the tax environment, particularly the Goods and Services Tax (GST), is complex as it operates under provincial jurisdictions. The blog outlines the GST structure for the hospitality sector in 2025, focusing on caterers, hotels, and restaurants. It highlights GST rates on accommodation and food, emphasizing varying provincial rates (15-16%) and possible reductions or exemptions based on business size and payment types. These updates stem from the 2025 provincial finance acts aimed at enhancing compliance and promoting digital payments. 

Overview of GST for Hospitality Industry 

The GST for Hospitality Sector comes primarily within the provincial domain of sales tax on services, as it consists of accommodation, food and event-related facilities. They are not taxed at the supply end in contrast with the GST on goods at the federal level. There is a focus on lower charges in 2025 for digital payments (through cards/mob-wallet/QR codes etc.) to promote cashless transaction economies. On the reduced rates, input tax adjustments (which you can think of as analogous to credits) are typically not allowed; businesses cannot deduct taxes paid on inputs. 

Key factors influencing rates: 

• Business size: Small, non-corporate firms may get exceptions to low rates. 

• Location and facilities: A/C venues or hotels/clubs can be hit with higher taxes. 

• Turnover thresholds: Small businesses, for example, (less than 5 million PKR turnover per annum) to be exempted. 

• Mode of Payment: Discount on making payment through electronic means. 

Now, break it down segment by segment. 

 

GST Rates on Hotel Accommodation 

Hotel accommodation is a key in the hospitality industry, and GST Rates on Hotel Accommodation widely fluctuate among states. These are prices for booking rooms, frequently with extras like in-room dining. 

Punjab 

Standard rate is 16% for corporate, franchise, chain hotels, which has more than 20 rooms. Nevertheless, little non-chain hotels (less than 20 rooms) have a lower rate of 5% applying without a creditable tax offset. 

Sindh 

Businesses are exempt if they generate less than PKR 5 million in annual turnover, as long as they are not air-conditioned, part of a franchise or situated in taxed premises (shopping malls or hotels). Otherwise, the standard 15% applies. For the bigger hotels, no graduated scale is indicated other than the deductions. 

Khyber Pakhtunkhwa 

Standard around 15%, lower for non-corporate setups under tourist areas (e.g. 10% for certain services without input adjustment). Hotel caterer-like services could be at 10% for functions. 

Balochistan 

Assumed under the head of overall hospitality services at lower 8% (without input adjustment), may even fall to 2%, if POS systems were in place for an electronic invoice. Exemptions for turnover of less than PKR 2.5 million, subject to the same conditions as Sindh. 

Islamabad Capital Territory  

15% discount on hotel Facilities based on updated 2025 rates. 

In tourism-dependent areas, the provinces like KP and Balochistan give incentives, but hotels are required to get registered and follow digital reporting system in order to avail markdowns. 

 

GST on Hotel Food and Restaurant Services 

Speaking of the food available in hotels, GST on hotel food is generally dealt with independently or clubbed with accommodation. It encompasses buffets, room service and a la carte dining, under the category of GST rate for food in the hospitality industry. 

Punjab

16% standard, decreased to 5% (no input credit) for debit/credit cards/mobile wallet / QR scan. This is particularly the case in hotel restaurants. 

Sindh

For food and beverage services in hotels if paid through credit / debit card, sub section of section 153 to the extent of reduced to 8% (No adjustment of input) Exemptions reflect corresponding rules on accommodation for small scale operators. 

Khyber Pakhtunkhwa

Standard about 15%, 10% for ancillary food services without input adjustment. 

Balochistan

8% discounted tax rate for hotel-based eateries, reduced further to 2% with POS integration (except for the franchisee or club setups). 

ICT

All food services in hotels are to be subjected to 15%. 

The bundled rate may apply for hotel room rates just above set thresholds and any inclusions such as food, but separate billing can sometimes improve tax efficiency. 

 

Hospitality Industry GST Rate for Standalone Restaurants 

There is a separate hospitality industry GST rate for standalone restaurants, cafes and eateries which is generally lower than that of hotels as these are small businesses. This excludes those inside hotels. 

Punjab

16% standard rate, but a reduced tax (no input) of 5% for electronic transfers. 

Sindh

8% down on digital transactions (none contributed). Exempt if turnover is less than PKR 5 million and non-AC/non-franchised. 

KP

15% standard, with a possible 10% for certain setups. 

Balochistan

8% floor, adjustable to 2% with POS and e-invoicing (same as cafes, food huts, etc., not attached to hotels). 

ICT

15%, possible 5% for card-based payments in line with recent FBR regarding. 

These levels are an incentive to adopt digital, with a penalty for not being integrated at POS. 

 

GST Rates for Caterers 

Caterers, who do events like weddings and corporate functions, often straddle restaurants but also have unique things to consider, especially outdoor service. 

Punjab

Flat 5% with no input tax credit benefit including marriage halls and pandals. 

Sindh

Except for turnovers less than PKR 5 million subject to condition (No AC, single outlet etc.). Otherwise, 15% standard. 

KP

10% without input tax adjustment for stand-alone and hotel-connected caterers. 

Balochistan

Fall under restaurant at 8% (can reduce to 2% with POS) or fixed for event halls (e.g., PKR 50,000 per function for premium categories). 

ICT

15%, packaged with services around the event. 

Caterers get exemptions if they are small and do not have ties to taxed venues. 

 

Key Insights  

• Reduced Rates Favor Digital and Small Businesses: For small businesses and restaurants, there was a 2-8 percent savings on encountering electronic payments. 
• Greater Scrutiny for Hotels: Often, there are fewer exemptions for accommodations than food services, and that’s especially true in urban provinces like Punjab and Sindh. 
• Provincial Variations: Punjab’s minimum reduced rates are the lowest (5%) and in Balochistan tech adoption is rewarded by 2%. The caterers are at 10%, and KP tells us to be moderate. 
• Impact on Industry: The rates are intended to bring the sector into the formal economy; however, small operators in Sindh and Balochistan benefit from exemptions that decrease compliance 

Businesses are encouraged to check with their provincial collectors to determine precise applicability as certain criteria such as utility bill caps (PKR 40,000/month for each energy head) can stimulate exemptions. 

 

Conclusion 

GST in Pakistan is crucial for hotels, restaurants and catering to avoid penalties and reduce costs. The 2025 changes put digital use of the system and exemptions for SMEs on steroids. This can play a role in the development of the sector. Whether it is GST Rates on hotel accommodation, or GST on hotel food or overall GST for hospitality industry, please keep in mind that rates are specific and may vary from state to state. POS benefits for the industry If you’re in the hospitality industry. GST could dramatically slash your effective hospitality industry’s GST rate.  

The health and pharmaceutical industry are a crucial aspect of public interest; therefore, governments are careful to tax the sector in a fair manner. GST on Pharmaceuticals has been designed to make the essential medicines available at an affordable rate and would also retain tax compliance throughout the distribution chain. It is important for manufacturers, distributors, hospitals, and pharmacies to be aware of what pharmaceuticals and medical supplies are exempt versus taxable. 

In this blog, we will discuss GST on Medicines, exemptions, and tax rates under business. 

 

Overview of GST 

Launched in 2017, GST has effectively replaced several indirect taxes, thereby simplifying the supply chain for pharmaceuticals. The GST on medicines, moreover, is aimed at ensuring that essential and life-saving medicines remain within easy reach while charging normal rates for others. Before the 2025 reforms, the rates stood at levels of Nil, 5%, 12%, and 18%. The most recent novelty of GST on medicines is an evolution toward a much simpler system, with the majority now sitting at 5% and greatly expanded exemptions. 

These were made to ease the burden on patients, particularly as they battle long term ailments and diseases including cancer, diabetes and rare diseases. Reforms also address inverted duty structures helping manufactures and distributors under the GST in the pharma sector. 

 

Current GST Rates on Medicines 

Nil (0% GST): Applicable to only lifesaving and vital drugs. Some 36 drugs (including 33 previously at 12% and 3 at 5%) would be completely exempt. They include treatments for cancer, rare genetic conditions, HIV, TB and serious cardiovascular disease. Examples include: 

• Drugs used in the treatment of cancer (e.g., some targeted therapies). 

• Drugs that treat rare diseases such as Agalsidase Beta, Imiglucerase and Eptacog alfa (activated recombinant coagulation factor VIIa). 

• Vaccines under government tenders, human blood derivatives and contraceptives. 

5% GST: Current normal rate for most drugs and formulations, down from 12%. This includes: 

• Diabetes medications, hypertension drugs, anti-malarial and common formularies. 

• Allopathy, Ayurveda, Unani, Siddha and Homoeopathy and bio-chemic drugs. 

• Oral Rehydration Salts, insulin and most over the counter (OTC) medicines. 

• This flat rate eases compliance and minimizes costs of regular medical needs. 

Higher tax rates (18%): Applicable to over-the-counter items such as nicotine gums for quitting smoking or some health supplements which do not fall under core medicines. 

 

Taxability and Exemptions 

Medical equipment and devices also end up gaining from the GST reductions on healthcare and medicine: 

• No GST: Sale of healthcare services (such as patient care, consulting physician visit). Supply of drugs and consumables provided during In-patient treatment is treated as composite supply and falls under exempt category. 

• 5% GST (reduced from 12-18%): 

• Bandages, gauzes, dressings and disposable surgical. 

• Diagnostic kits, reagents and gluco meters and test strips. 

• Oxygen for medical use, thermometers, surgical instruments, and virtually all medical/dental/veterinary equipment. 

• Corrective spectacles and goggles. 

It promotes preventive care and diagnostics as these reductions expand the scope of the health sector in GST rates, making it more accessible. 

 

Impact on the Pharma Sector and Consumers 

The GST on pharma sector has seen positive effects:  

Reduced inputs on account of the solution to inverted duties. 

So much for being able to go into business and have all the states competing rates of tax. 

No compulsory recall/re-labelling of pre-September 2025 stock, helping to facilitate a smooth transition. 

In terms of consumers, the new GST on medicines means prices will fall directly 12% tax over a medicine strip currently has come down to 5%, providing considerable savings for patients with long-term treatments. 

Hospitals and pharmacies are allowed to take the input tax credit (ITC) on taxable supplies and not on exempt supplies. Expired medicines require ITC reversal. 

 

New GST on Medicines: What Businesses Should Know 

The new GST on medicines rules focuses on transparency, correct billing and right input tax credit utilization. Pharma businesses must: 

• Stay updated with the all new GST notifications 

• Review product classifications regularly 

• Documentation and filing of GST needs to be precise 

It’s important that you don’t miss out on updated GST rules, as the penalties can be financial and legal. 

GST Guidance by CBM Consultants 

CBM Consultants can assist your pharmaceutical business to efficiently control GST on medicines through properly classifying products, applying the right GST rates, and utilizing sales tax exemptions. We are engaged in processing GST registration along with return filings and its supporting due diligence systematically with the reduction of input tax credit including raw materials, import duties and services. By keeping abreast of the latest changes in regulations, GST reduction on healthcare and medicines and new GST notifications, we help pharma companies to ensure compliance, reduce risks during audits or assessments. Also, we enhance tax efficiency so that businesses can concentrate on their core healthcare practices. 

 

Conclusion 

The changing landscape of GST on pharmaceuticals regime focusses on public health, as increased exemptions and lower rates make critical medicines and supplies cost effective. By slashing GST on health and medicines, it not only strengthens its imprint as the “Pharmacy of the World” but also reduces financial stress at home. With GST on Pharmaceuticals, businesses should keep themselves informed based on the official GST announcements for accurate compliance. For patients, this turns into greater access to quality care and a more citizen-centered tax system.