The government is set to implement a significant measure in the upcoming budget (2025-26) to abolish the four percent “further sales tax” on unregistered sales taxpayers. While the move is expected to result in short-term revenue loss for the Federal Board of Revenue (FBR), it aims to register the entire supply chain of businesses, including dealers, wholesalers, and retailers, into the documented tax regime, BR reported, citing sources.
As per the report the government plans to register the entire supply chain, from manufacturing to retail outlets, under the sales tax department. This effort will also extend to the importers, whose supply chains for imported goods are not currently registered with the sales tax department.
By removing the additional sales tax on unregistered businesses, the government seeks to bring all players within the tax system.
Currently, unregistered sales tax entities face higher withholding taxes or further taxes on sales, similar to non-filers of income tax returns. The abolition of the four percent “further sales tax” will lead to an initial revenue loss for the FBR, but officials maintain that this is a temporary setback. In the long term, the expanded tax net is expected to result in significantly higher revenue.
As part of the Finance Bill (2025-26), the FBR has proposed amendments to the Sales Tax Act to facilitate the documentation of the entire supply chain. The “further sales tax” rate was previously increased from three to four percent in the amended Finance Bill 2023 to discourage supplies made to unregistered persons. This higher tax rate applies to supplies made by registered businesses to those who are not registered for sales tax or are not active taxpayers.
Officials noted that the sales tax base currently includes between 40,000 to 60,000 registered taxpayers, many of whom are paying minimal amounts.
