Tax Book 2023

Taxation System Chapter- 01

INDIRECT TAXES

Following are the indirect Taxes under the Pakistani Taxation System.

SR. Name of prevailing Law Remarks

1. Customs Act, 1969
   Goods imported and exported from Pakistan are liable to
   Customs duties as prescribed through code or otherwise
   in Pakistan Customs Tariff. Customs duties in the form of
   import duties and export duties constitute a major part of
   the total tax receipts. The rate structure of customs duty
   is determined by a large number of socio-economic
   factors. However, the general scheme envisages higher
   rates on luxury items as well as on less essential goods.
   The import tariff has been given an industrial bias by
   keeping the duties on industrial plants and machinery and
   raw material lower than those on consumer goods.


2. Federal Excise Act, 2005
   Federal Excise duties (FED’s) are leviable on a limited
   number of goods produced or manufactured, and
   services provided or rendered in Pakistan. On most of the
   items FED is charged on the basis of value or retail price.
   Some items are, however, chargeable to duty on the
   basis of weight or quantity. Classification of goods is
   done in accordance with the Harmonized Commodity
   Description and Coding system which is being used all
   over the world. All exports are liable to 0% FED.


3. Sales Tax Act, 1990
   Sales tax is a value added tax system. Being as indirect
   tax collectable from whole supply chain i.e. importers,
   manufacturers, wholesalers (including dealers and
   distributors) and retailers with certain exceptions.
   Therefore, the sales tax is a multi stage tax payable at
   standard rate of 17% u/s ( 3 ) of the Sales tax Act, 1990
   on:

 Goods imported into Pakistan;

 All taxable supplies by a registered person in

respect of any taxable activity carried on by him;

VAT is a percentage tax levied on the price each

registered person charges for goods or taxable services

rendered by him.

VAT normally utilizes as system of tax credit (being as

input tax adjustment) to place the ultimate and read

burden on tax on the final consumer and to relieve the

intermediaries from any tax burden except the final

consumer.

Further there are also the concepts of minimum tax and

Final tax under the sales tax Act on specific persons or

class of persons or sectors as the case may be.

2 .2 Tax relief’s in cross border transactions

In cross border Transactions, Pakistan taxation system provides following types of reliefs: