Unregistered taxpayers: 4pc ‘further sales tax’ to be abolished

ISLAMABAD: The government is all set to take a bold documentation measure to abolish four percent “further sales tax” on un-registered sales taxpayers and sustain huge revenue loss by registering the entire supply chain of businesses in budget (2025-26).

Sources told Business Recorder here on Tuesday that the abolition of the four percent “further sales tax” will result in revenue loss to the Federal Board of Revenue (FBR), but it will be instrumental in registration of the entire supply chain covering dealers, wholesalers and retailers. From manufacturing stage till retail outlets, the entire supply chain would come under the documented regime.

The same is the situation with the importers where subsequent supply chain of imported goods are not registered with the sales tax department.

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The un-registered sales tax persons are enjoying the same status of “non-filers of income tax returns” and carrying out all business transactions by paying higher rates of withholding taxes or further tax on sales tax side.

The revenue loss after abolition of the “further sales tax” would be temporary and revenue gains are much higher in long term period.

Through Finance Bill (2025-26), the FBR has proposed amendments in the Sales Tax Act for the documentation of the entire supply chain with the sales tax department.

In 2023, the FBR had increased the rate of “further sales tax” from three to four percent in the amended Finance Bill 2023.

Presently, the rate of further tax is four percent on the supplies made to the un-registered persons.

The rate of “further sales tax” was increased by one percent to discourage supplies made to the unregistered persons. If a person intended to remain out of the sales tax net, he is required to pay higher rate of further tax at the rate of four percent.

Under the law, the “further tax” is charged on supplies of taxable goods made by a registered person to a person who has not obtained a sales tax registration number or has obtained a registration number but is not an active taxpayer.

The said rate of sales tax under sub-section (1A) of Section 3 of the Sales Tax Act was enhanced to four percent through the Finance Act, 2023.

Officials added that the sales tax base totalled between 40,000 to 60,000 who are paying sales tax including those depositing very low amount of sales tax.

Copyright Business Recorder, 2025