GST in Pakistan: Complete Guide for Small Businesses (2025)

GST (General Sales Tax) in Pakistan is a value-added consumption tax administered by the Federal Board of Revenue (FBR). Levied at a standard rate of 18% on most goods and services, GST is a critical compliance requirement for Pakistani businesses. Understanding GST is essential for legal operation, avoiding penalties, and maintaining healthy business finances.

What is GST in Pakistan?

GST (also called Sales Tax at the federal level) is an indirect tax charged on the supply of goods and services in Pakistan. It’s a consumption tax—ultimately paid by the end consumer but collected and remitted by businesses at each stage of the supply chain.

The tax works on a value-added principle: businesses charge GST on sales (output tax) and claim credit for GST paid on purchases (input tax). The difference is remitted to FBR.

Current GST Rates in Pakistan (2025)

Category	Rate	Examples
Standard Rate	18%	Most goods and services
Reduced Rate	10%	Some food items, solar panels
Zero Rate	0%	Exports, certain agricultural inputs
Exempt	N/A	Basic food staples, healthcare, education
Extra Tax	1-3%	Non-filers additional tax

Note: Rates may change. Always verify current rates from FBR’s official sources.

Who Needs to Register for GST?

Mandatory Registration

You must register for GST if:

• Annual taxable turnover exceeds Rs. 10 million
• You are an importer of goods
• You are a manufacturer (regardless of turnover)
• You supply goods to registered persons and want them to claim input tax
• You are a retailer in a Tier-1 area with annual turnover exceeding Rs. 10 million

Voluntary Registration

Even if below thresholds, you may benefit from voluntary registration:

• Claim input tax credits on purchases
• Appear more professional to B2B customers
• Avoid extra tax when buying from registered suppliers
• Required for many government tenders

GST Registration Process

For detailed step-by-step instructions, see our GST registration guide. Here’s the overview:

Step 1: Create IRIS Account

Visit FBR’s IRIS portal (iris.fbr.gov.pk) and register for an account using your CNIC.

Step 2: Gather Required Documents

• CNIC copy
• NTN (National Tax Number)
• Bank account details
• Business address proof (utility bill, rent agreement)
• Business registration documents (if applicable)
• Partnership deed or company documents (for non-sole proprietors)

Step 3: Submit Application

Complete the online form with business details, upload documents, and submit.

Step 4: FBR Verification

FBR may conduct physical verification of your business premises. Ensure business is operational and records are organized.

Step 5: Receive STRN

Upon approval, you receive a Sales Tax Registration Number (STRN). Display this on invoices and at your business premises.

How to Calculate GST

Basic Formula

GST Amount = Taxable Value × 18%

Example: Selling goods worth Rs. 10,000:

• GST = 10,000 × 18% = Rs. 1,800
• Total Invoice = Rs. 11,800

Reverse Calculation (Extracting GST from Total)

If you have a GST-inclusive price and need to extract GST:

GST = Total Amount × (18/118)

Example: Total Rs. 11,800:

• GST = 11,800 × (18/118) = Rs. 1,800
• Taxable Value = Rs. 10,000

Input vs Output Tax

Output Tax: GST you charge on sales

Input Tax: GST you pay on purchases

GST Payable = Output Tax – Input Tax

Example:

• Monthly Sales: Rs. 500,000 (Output Tax: Rs. 90,000)
• Monthly Purchases: Rs. 300,000 (Input Tax: Rs. 54,000)
• GST Payable: Rs. 90,000 – Rs. 54,000 = Rs. 36,000

GST Invoicing Requirements

A proper tax invoice must include:

• Invoice number and date
• Your business name, address, and STRN/NTN
• Customer details (name, STRN if registered)
• Description of goods/services
• Quantity and unit price
• Taxable value
• GST amount (separately shown)
• Total amount

Learn how to create proper invoices in our invoice creation guide.

GST Filing and Returns

Monthly Returns

GST returns must be filed monthly by the 18th of the following month. Late filing attracts penalties.

Return Forms

• Sales Tax Return: Main monthly return showing sales, purchases, output/input tax
• Annexures: Detailed breakdowns of invoices, purchases from registered/unregistered persons

Electronic Filing

All returns are filed electronically through IRIS portal. Keep digital records of all invoices as they may be selected for audit.

Common GST Mistakes to Avoid

• Late Filing: Penalties of Rs. 5,000-25,000 plus interest on unpaid tax
• Incorrect Calculations: Always double-check GST math—errors trigger audits
• Not Claiming Input Tax: You’re entitled to claim GST paid on business purchases
• Missing Documentation: Keep all invoices for minimum 6 years
• Charging GST on Exempt Items: Know what’s exempt vs taxable
• Not Verifying Supplier STRN: Verify suppliers’ registration to claim input tax

How Accounting Software Simplifies GST

Modern accounting software dramatically simplifies GST compliance:

• Automatic Calculation: GST computed correctly on every invoice
• Tax Reports: Generate input/output tax reports instantly
• STRN Verification: Some software integrates with FBR to verify supplier registration
• Return Preparation: Data organized in return format for easy filing
• Audit Trail: Complete record of all transactions for audit purposes

HysabOne is designed specifically for Pakistani FBR compliance requirements.

Frequently Asked Questions

Conclusion

GST compliance is not optional for qualifying Pakistani businesses—it’s a legal requirement with significant penalties for non-compliance. However, with proper understanding and systems in place, GST management becomes routine.

The key is maintaining accurate records, filing on time, and understanding your input tax entitlements. Proper accounting software transforms GST from a compliance burden into an automated process.

Need help managing GST for your business? HysabOne is designed specifically for Pakistani tax requirements—try it free and simplify your GST compliance today.