ISLAMABAD: The federal government has proposed a significant expansion in the scope of goods subject to sales tax on a retail price basis through the Finance Bill 2026-27. The measure is aimed at enhancing revenue collection and improving tax compliance across the supply chain.
A total of 21 new items have been included in the Third Schedule of the Sales Tax Act.
Explaining the detail Arshad Shehzad the prominent sales tax expert informed, Pakistan’s tax system has historically faced challenges due to a narrow tax base and difficulties in effectively capturing sales tax at various stages of distribution, including manufacturers, importers, wholesalers, distributors, commission agents, and retailers. To address these challenges, the Sales Tax Act, 1990 provides for a single-stage sales tax collection mechanism for specified goods listed in the Third Schedule.
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Under this mechanism, sales tax is charged on the maximum retail price (MRP) rather than the ex-factory or import value. Manufacturers and importers are required to collect and deposit sales tax based on the retail price, thereby ensuring taxation at the highest value in the supply chain and reducing opportunities for revenue leakage.
The Finance Bill 2026-27 proposes the inclusion of several additional product categories in the Third Schedule, thereby broadening the range of goods subject to retail price-based taxation. The proposed expansion is expected to increase revenue collection without much focus on broadening of sales tax net.
The following categories of goods are proposed to be added to the Third Schedule: Vegetable and animal fats and oils; Sugar confectionery; Pasta and couscous (Heading 19.02); Sauces, ketchup, condiments and seasonings; Fermented beverages; Insecticides, disinfectants and similar products (Heading 38.08); Plastic household articles; Bags, suitcases, wallets and similar containers (Heading 42.02)
Footwear; Bathroom accessories, sanitary ware and related fittings;
Milk and dairy products; Preparations for use on the hair (Heading 33.05); Cosmetics, toiletries and personal care products (Heading 33.07); Tissue paper and sanitary paper products; Jams, jellies and other fruit preparations; Household utensils and ceramic products. If enacted, the proposed amendments will substantially broaden the scope of goods subject to sales tax on a retail price basis, bringing a wide range of consumer products within the ambit of the Third Schedule.
The expansion is expected to have significant pricing, compliance, and administrative implications for manufacturers/ importers operating in the affected sectors. Businesses should therefore assess the potential impact on their tax obligations, pricing strategies, and supply chain processes to ensure timely compliance with the new requirements,” Arshad Shehzad concluded.
Copyright Business Recorder, 2026
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