11th Schedule of Sales Tax: Agents, Rates, and Deposit

The Eleventh Schedule of the Sales Tax Act, 1990 sets out Pakistan’s sales tax withholding regime: it names the buyers who must deduct sales tax from what they pay their suppliers, fixes the rate of that deduction by the buyer’s category and the supplier’s Active Taxpayers List (ATL) status, and lists the supplies that fall outside the regime altogether. The schedule operates under Section 3(7) of the Act, and the Federal Board of Revenue (FBR) uses it to shift collection responsibility onto large, easily monitored purchasers instead of relying on every seller to self-report.¹

Who Must Withhold

Two categories cover most withholding agents:

Federal and provincial government departments, autonomous bodies, and public sector organizations.
Companies as defined under the Income Tax Ordinance, 2001 — which is a wide net, not just large corporate taxpayers.

The schedule also names specialized agents tied to specific transactions:¹

Any registered person receiving advertisement services.
Registered persons buying cane molasses from non-active taxpayers.
Registered manufacturers of lead batteries when buying lead or scrap batteries.
Payment intermediaries and couriers handling digitally ordered goods supplied from within Pakistan through online marketplaces or apps.

Every agent needs to check the supplier’s status on FBR’s Active Taxpayers List before completing the purchase. That single check decides the rate, and most compliance problems begin with skipping it.

How Much to Withhold

When the Supplier Is on the Active Taxpayers List

A government body or company buying from an active taxpayer withholds one-fifth (20 percent) of the sales tax shown on the invoice.¹ At the current 18 percent standard sales tax rate, that comes to 3.6 percent of the taxable value. The supplier keeps the remaining 14.4 percent and treats the withheld portion as a credit on their own return.

A lower rate applies when the active-taxpayer supplier is a wholesaler, dealer, or distributor. The agent retains one-tenth (10 percent) of the invoice sales tax, which works out to 1.8 percent of the taxable value at the 18 percent rate.¹

When the Supplier Is Not on the Active Taxpayers List

Consequences sharpen, and they differ by the type of buyer:

Government bodies withhold the entire sales tax shown on the invoice, or the full tax calculated on the gross value of the supply if there is no valid tax invoice.¹
Companies (other than those exporting surgical instruments) withhold 5 percent of the gross value of the supply.¹

Note what that 5 percent is measured against. It applies to the gross value, not the tax amount. On a Rs 1,000,000 supply, the company withholds Rs 50,000 regardless of the applicable tax rate. For the supplier, this is a hard incentive to get onto the ATL and stay there.

Rates for Specific Transactions

A few categories carry their own rates that displace the general rules:

Advertisement services: the recipient withholds the full sales tax payable on the service.
Lead and scrap batteries: lead battery manufacturers withhold 80 percent of the applicable sales tax.
Digitally ordered goods: payment intermediaries and couriers withhold 2 percent of the gross value of supplies from sellers on online platforms.¹

For cottage industries and non-tier-I retailers selling through online platforms, that 2 percent withheld by the intermediary or courier is the final discharge of their sales tax liability under Section 3(7A). They do not have to file separately for those transactions.¹

Supplies Outside the Withholding Regime

Several categories of supplies are exempt from withholding, either because tax is collected on them through another mechanism or because the supply chain makes withholding impractical:

Electrical energy.
Natural gas.
Petroleum products supplied by exploration companies, refineries, oil marketing companies, and dealers of motor spirit and high-speed diesel.
Vegetable ghee and cooking oil.
Telecommunication services.
Third Schedule goods, where tax is charged on the retail price by the manufacturer.
Goods from importers who already paid value addition tax at import.
Supplies from an active taxpayer to a registered person, with carve-outs for advertisement services, lead battery inputs, and certain other categories listed in the Table.
Sand, stone, gravel, crush, and clay supplied to low-cost housing schemes sponsored or approved by Naya Pakistan Housing and Development Authority.¹

The active-taxpayer-to-registered-person exemption is the one that removes most day-to-day transactions from the regime. If both parties are registered and the supplier is on the ATL, withholding generally does not apply, except in the carved-out categories.

Deposit Deadline and Procedure

The agent must deposit the withheld amount into the government treasury by the 15th of the month following the month in which payment was made to the supplier. The deposit goes to a designated branch of the National Bank of Pakistan under the head of account “B02341-Sales Tax,” using a return-cum-payment challan prescribed by FBR.

An agent who is themselves registered for sales tax can combine the withheld amount with their regular liability and deposit both together through the standard return procedure. Either way, the challan needs the supplier’s National Tax Number or CNIC so FBR credits the withheld amount to the correct account. Wrong supplier details are a routine source of trouble, and they block the supplier’s downstream credit claim until fixed.

How the Supplier Claims Credit

The agent issues a certificate of deduction to the supplier confirming the amount withheld and deposited. That certificate is the supplier’s proof that part of their tax has already been paid, and they use it to claim an input tax adjustment on their monthly return.

FBR’s IRIS portal carries a feature called “Application for Credit Against Sales Tax Withheld by FTN Holders,” which lets suppliers formally apply for credit of sales tax withheld under the Eleventh Schedule. The system is meant to reconcile the withheld amount with the supplier’s account and stop credit claims from being rejected because the agent misreported the transaction. If a certificate is lost, the supplier can request a duplicate from the agent in writing.

Penalties for Non-Compliance

Section 11F of the Sales Tax Act deals specifically with failures by withholding agents. If you were required to withhold and either did not, or withheld but did not deposit, an officer of Inland Revenue at least at Assistant Commissioner rank can issue a show-cause notice and pass an order to recover the amount along with penalties and default surcharge.²

Under Section 33, the penalty for failing to deposit on time is Rs 10,000 or 5 percent of the tax involved, whichever is higher. Payment within 10 days of the due date replaces that penalty with Rs 500 per day of default. A first miscalculation in a year carries no penalty. If non-payment continues 60 days after formal notice, the defaulter can face prosecution before a Special Judge, with imprisonment of up to three years, a fine up to the tax involved, or both.²

On top of the penalty, a default surcharge of 12 percent per annum runs on the unpaid amount for the period of delay. In tax-fraud cases the surcharge is 2 percent per month.

Mistakes That Cause Trouble

The Active Taxpayers List is not static. FBR publishes a new list each financial year on March 1, valid through the last day of February the following year. A supplier who was active last month may not be active this month. Checking before every significant purchase is not optional.

The base for the withholding calculation is easy to confuse. When buying from an active taxpayer, you withhold a fraction of the sales tax shown on the invoice. When a company buys from a non-active taxpayer, the 5 percent applies to the entire purchase price. This is one of the most common audit findings.

Suppliers with tax withheld by multiple buyers can accumulate a substantial credit balance in their FBR account. The IRIS credit application feature exists for that situation, but reconciliation still depends on the agent reporting each transaction with the correct supplier NTN or CNIC. Enter the wrong identifier and the supplier’s credit claim sits in limbo until someone resolves the mismatch.