The Finance Act, 2024, has introduced several significant changes to Pakistan’s sales tax regulations, impacting various sectors and supply chains. One of the major updates is the withdrawal of sales tax zero-rating for specific items. This includes stationery items (excluding exercise books), packaged milk, fat-filled milk, and local supplies to registered exporters. The removal of zero-rating aims to capture the supply chain more effectively.
In the Eighth Schedule, key modifications have been made. Imported LPG and supplies from integrated outlets of textile and leather articles have been brought under the standard sales tax regime, removing their previous special status. Additionally, a reduced sales tax rate of 1% on medicaments classified under chapter 30 of the Customs Act, 1969, has been withdrawn, with these items now subject to the standard rate of 18%. Certain goods that were previously exempt, such as specific stationery items, tractors, oil cake, poultry and cattle food, and various seed meals, are now taxed at a reduced rate of 10%. The tax rate on imported laptops and computers has also been increased from 5% to 10%.
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To broaden the tax base and enhance revenue, the Finance Act, 2024, has led to the removal or adjustment of exemptions previously available under Table-1 & Table-2 of the Sixth Schedule. This includes exemptions on edible vegetables and fruit imported from Afghanistan, diagnostic kits or equipment, and cinematic machinery and equipment. These items have been moved to the Eighth Schedule, where they are subject to reduced tax rates.
New exemptions have been introduced under Table-1 & Table-2, covering the supply of electricity to AJK, the import of gold under the entrustment scheme (SRO 760(1)/2013), and the import of certain medications and bovine semen. Furthermore, exemptions are granted for goods received as gifts or relief consignments during natural disasters or from foreign governments or organizations, provided certain conditions are met. Other exemptions include POL products, milk (excluding branded or corporate dairy farm milk), and iron and steel scrap (excluding recycled copper supplied by manufacturers/exporters under the Export Facilitation Scheme, 2021).
