Sales Tax & FED Changes in Pakistan Budget 2026-27
Budget 2026-27 sales tax and Federal Excise changes - base broadening, exemption rollback, telecom and fuel rates, retailer regime, POS integration.
Worked example: Rs 50,000,000 per month
Annual income Rs 600,000,000 - here's how it would be taxed both ways under Finance Act 2025.
| Taxable income band | Rate | Income in band | Tax in band |
|---|---|---|---|
| Up to Rs 600,000 | 0% | Rs 600,000 | Rs 0 |
| Rs 600,001 - Rs 1,200,000 | 15% | Rs 600,000 | Rs 90,000 |
| Rs 1,200,001 - Rs 1,600,000 | 20% | Rs 400,000 | Rs 80,000 |
| Rs 1,600,001 - Rs 3,200,000 | 30% | Rs 1,600,000 | Rs 480,000 |
| Rs 3,200,001 - Rs 5,600,000 | 40% | Rs 2,400,000 | Rs 960,000 |
| Above Rs 5,600,000 | 45% | Rs 594,400,000 | Rs 267,480,000 |
| Total slab tax | Rs 269,090,000 | ||
Sales tax base broadening, exemption rollback
Pakistan's sales tax (GST) base has historically been narrower than the IMF programme targets, with multiple sectoral exemptions and zero-rated regimes. Budget 2026-27 continued the multi-year trend of base broadening - several exemptions were withdrawn and zero-rating collapsed further. Tax-expenditure data released alongside the budget showed total exemptions fell to PKR 2.35 trillion in FY26 from PKR 2.43 trillion in FY25, the first drop in seven years. Sales tax exemptions still rose slightly but zero-rated exemptions dropped sharply by 89%. The direction continues into FY27.
Retailer regime and POS integration
The retailer regime is the most politically contested item in any Pakistani budget. Tier-1 retailers must integrate with FBR's Point of Sale system; smaller retailers participate via simplified schemes. Budget 2026-27 reportedly leaves the broad architecture intact - the speech noted that 'retail and petroleum stay outside the FY27 tax net' in terms of headline rate hikes, but the documentation push via Sections 236G and 236H (advance tax on distributors and retailers) and POS integration thresholds continues quietly. For businesses near the Tier-1 threshold the practical question is when, not if, integration becomes mandatory.
Telecom, fuel, and Federal Excise
Federal Excise on telecom services and certain manufactured goods (sugar, cement, beverages) is a major non-income-tax revenue line. Petroleum Development Levy (PDL) - technically not a tax but a federal levy - was raised from PKR 1.5 trillion projected for FY26 to a PKR 1.7 trillion target for FY27. Telecom and internet sit under Section 236 advance tax on top of Federal Excise. None of these has a single 'rate change' line in the budget speech but together they account for a significant chunk of consumer-facing price moves you may see in the days after the budget passes.
What changes for ordinary businesses
For an ordinary registered business filing monthly sales tax returns, the main impact is the slow withdrawal of sector-specific exemptions and the rate adjustments on input claims. Cross-check your sales tax invoice format and your input tax adjustment against the FBR's updated SRO list after the Finance Act 2026 is gazetted. For unregistered or quasi-formal businesses, the documentation push - tax invoices required for all B2B transactions above a threshold, electronic invoicing for Tier-1 retailers, mandatory NTN on transactions - tightens further. The compliance gap between filers and non-filers continues to widen.
Frequently asked questions
Did sales tax rates change in Budget 2026-27?
Headline sales tax rate is unchanged. Base broadening and exemption rollback continued - several sectoral exemptions were withdrawn rather than rate increases.
Were retailers and petroleum brought into the tax net?
The speech specifically noted these sectors remain outside the formal documentation push for FY27. Sections 236G / 236H and POS integration continue at existing thresholds.
What about Federal Excise on telecom and fuel?
FED on telecom continues alongside Section 236 advance tax. The Petroleum Development Levy target was raised from PKR 1.5tn to PKR 1.7tn for FY27.
Should my business renew its POS integration?
If you are a Tier-1 retailer, yes - POS integration is mandatory. Check FBR's Tier-1 threshold list each year as it expands.
Where can I find the exact SRO changes?
FBR publishes SROs implementing Finance Act sales-tax measures within days of the act being gazetted. Track fbr.gov.pk's SRO repository.