3rd Schedule of Sales Tax: Goods, Retail Pricing, and Penalties

The Third Schedule of the Sales Tax Act, 1990, is a list of consumer goods on which sales tax is charged at 18% of the printed retail price rather than the transaction value between seller and buyer. The manufacturer pays the tax for locally produced goods, and the importer pays it for imported ones, so the money reaches the government before the product ever reaches a shop shelf. The retail price and the tax amount must be printed on the packaging, and skipping that step or under-declaring the price carries heavy penalties.

Goods Covered by the Third Schedule

The schedule reaches well beyond groceries. As of the 2025–26 version of the Act, it names the following categories by customs tariff heading:

  • Beverages: fruit and vegetable juices, aerated waters, syrups, squashes, powder drinks, milky drinks, and mineral or bottled water.
  • Food items in branded retail packing: ice cream, biscuits, tea, and spices.
  • Imported food products in retail packing: pet food, coffee, chocolates, and cereal bars.
  • Cigarettes.
  • Personal care and cleaning: toilet soap, detergents, shampoo, toothpaste, shaving cream, perfumery, and cosmetics.
  • Toilet paper and tissue paper.
  • Household electrical goods: air conditioners, refrigerators, deep freezers, televisions, electric fans, electric irons, washing machines, electric bulbs, tube-lights, and telephone sets.
  • Gas appliances: cooking ranges, ovens, geysers, and gas heaters.
  • Foam or spring mattresses, other household foam products, and tiles.
  • Paints, enamels, varnishes, dyes, thinners, and polishes in retail packing.
  • Automotive: motorcycles, auto rickshaws, tyres, tubes, storage batteries, auto-parts in retail packing, and lubricating oils or vehicular fluids in retail packing. Tyres, tubes, batteries, and auto-parts supplied directly to vehicle manufacturers or assemblers are excluded.
  • DAP (diammonium phosphate) fertilizer.
  • Cement in retail packing.
  • Shoe polish and shoe cream.

The Federal Government can add or remove items by official notification, so the list moves over time through Finance Act amendments.

How the Tax Is Calculated

Most sales tax in Pakistan applies to the transaction value at each stage of the supply chain. Third Schedule goods do not follow that pattern. Sales tax is charged at 18% of the retail price fixed by the manufacturer, or by the importer for imported goods.1Federal Board of Revenue. Sales Tax Act, 1990 – Section 3(2)(a) If the same brand or variety is sold at different prices in different markets, the highest price is the one used.

The Act defines “retail price” as the price inclusive of all duties, charges, and taxes other than sales tax at which the product is sold to the general body of consumers.2Federal Board of Revenue. Sales Tax Act, 1990 – Section 2(27) Federal excise duty and other levies are already inside that price; the 18% sales tax is then applied on top. The FBR can specify zones or areas for determining the highest retail price and may fix the retail price of any Third Schedule good directly by gazette notification.

Imported Third Schedule goods carry a floor. The retail price cannot be less than 130% of the customs value determined under the Customs Act, 1969, including customs duties and federal excise duty.3Federal Board of Revenue. Sales Tax Act, 1990 – Section 2(27), Proviso The floor stops importers from understating the retail price to shrink their tax base.

If a Third Schedule item also appears in the Eighth Schedule, which lists goods taxed at reduced or specific rates, the Eighth Schedule rate applies, but the calculation still runs off the retail price.1Federal Board of Revenue. Sales Tax Act, 1990 – Section 3(2)(a)

Printing the Retail Price on Packaging

The retail-price system only works if the price is visible along the whole chain. Section 3(2)(a) requires the retail price and the amount of sales tax to be “legibly, prominently and indelibly printed or embossed” by the manufacturer on each article, packet, container, package, cover, or label. For imports, the importer carries the obligation.1Federal Board of Revenue. Sales Tax Act, 1990 – Section 3(2)(a)

The printing has to survive the journey from factory or port to the buyer’s hands. A sticker that peels or ink that fades will not meet the “indelible” standard. The requirement also gives the consumer a check: anyone buying a bottle of juice or a tube of toothpaste can read what the manufacturer declared and what portion is sales tax.

Failing to print the retail price carries a penalty of PKR 10,000 or 5% of the tax involved, whichever is higher, and the goods are liable to confiscation. An adjudication authority can allow the goods to be redeemed, but only on payment of a fine of at least 20% of the total retail price.4Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 26 On a large shipment, that 20% floor can dwarf the flat PKR 10,000 fine.

Who Pays: Manufacturers and Importers

The person who puts the goods into the market carries the tax. Manufacturers owe the tax on domestic production; importers owe it on imports.5Federal Board of Revenue. Sales Tax Act, 1990 – Section 3(3) Small retailers selling Third Schedule products to consumers are not responsible for collecting or remitting this tax.

On imports, sales tax is charged and collected “in the same manner and at the same time as if it were a duty of customs,” so the importer pays before clearing the shipment.6Federal Board of Revenue. Sales Tax Act, 1990 – Section 6(1) If goods are entered for home consumption, tax applies on the date the goods declaration is filed. If they are cleared from a customs warehouse, it applies on the clearance declaration date. Delaying payment past seven days from the goods declaration shifts liability to whatever rate is in force on the actual payment date, which can be higher.

Domestic manufacturers pay the tax for each tax period by the due date and file a monthly return.7Federal Board of Revenue. Sales Tax

Input Tax for Third Schedule Manufacturers

Making Third Schedule goods does not cost you your input tax credits. Sales tax paid on raw materials, packaging, and services used in production can be adjusted against output tax, subject to the general rule that a registered person cannot adjust input tax exceeding 90% of output tax in any tax period.8Federal Board of Revenue. Sales Tax Act, 1990 – Section 8B(1) Because output tax on Third Schedule goods is calculated on the retail price, the output base is often larger than it would be under a normal value-of-supply regime, which works in favor of manufacturers claiming credits against that larger ceiling.

Third Schedule goods are also excluded from the minimum value addition tax collected at the import stage under the Twelfth Schedule, since tax on these items is already paid on a retail-price basis.9Federal Board of Revenue. Sales Tax Act, 1990 – Twelfth Schedule, Para 2(ix)

Penalties for Non-Compliance

The Act layers penalties by severity of the violation.

  • Failure to print the retail price: PKR 10,000 or 5% of the tax involved, whichever is higher, plus confiscation of the goods. Redemption requires at least 20% of the total retail price.4Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 26
  • Failure to deposit tax on time: PKR 10,000 or 5% of the tax involved, whichever is higher. Payment within ten days of the due date reduces the penalty to PKR 500 per day. If the tax remains unpaid 60 days after notice from an officer of Inland Revenue, imprisonment up to three years and a fine up to the full tax amount become possible.10Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 5
  • Counterfeit or missing tax stamps: PKR 25,000 or 100% of the tax involved, whichever is higher, plus confiscation of the goods. Vehicles used to transport non-conforming goods are subject to permanent seizure. Repeat offenders can have their premises sealed, and imprisonment can extend to three years with a further fine equal to the evaded tax.11Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 23
  • Failure to integrate with FBR’s monitoring system: up to PKR 1 million. Continued failure beyond two months allows the premises to be sealed.12Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 25
  • Late return filing: PKR 10,000, reduced to PKR 200 per day if filed within ten days of the due date.13Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 1

Imprisonment under the Act requires conviction by a Special Judge, not an FBR administrative decision. Even without conviction, though, confiscation, seizure, and sealing hit the business immediately.

Registration and Track and Trace

A manufacturer whose annual turnover from taxable supplies exceeds PKR 10 million, or whose annual utility bills exceed PKR 800,000, must register for sales tax with the FBR.14Federal Board of Revenue. Register for Sales Tax Making taxable supplies without registering carries a penalty of PKR 10,000 or 5% of the tax involved, with possible imprisonment if registration is delayed beyond 60 days from commencing taxable activity.

The FBR also runs a Track and Trace System covering tobacco, cement, sugar, and fertilizer, with planned expansion into beverages, tiles, and other categories that overlap with the Third Schedule. Manufacturers in covered sectors must integrate their production systems with the FBR’s computerized system. Non-integration draws penalties up to PKR 1 million, and premises can be sealed for continued failure after two months.12Federal Board of Revenue. Sales Tax Act, 1990 – Section 33, S. No. 25