FCC accepts appeals by poultry feed firms against 4% additional tax

A two-member bench of the Federal Constitutional Court (FCC), comprising Justice Aamer Farooq and Justice Muhammad Karim Khan Agha, has ruled that poultry feed manufacturers and poultry farmers are not liable to pay an additional 4% tax under Section 3(1A) of the Sales Tax Act, 1990, overturning a Lahore High Court judgement that had upheld the levy.

The bench allowed appeals filed by Shahzor Feeds (Pvt) Ltd, Lahore Feeds Ltd and S.S. Feed Mills Pvt Ltd against an order issued by the Commissioner Inland Revenue, LTU Lahore, on Sept 11, 2024.

The tax authorities had held that poultry feed manufacturers supplying products to poultry farmers were liable to pay an additional 4% tax because the recipients were not registered for sales tax.

The FCC observed that poultry farmers are exempt from sales tax under the law and are therefore not required to register. It held that imposing additional tax on feed manufacturers for supplying exempt farmers would be unjust and inconsistent with the sales tax regime.

The court said the purpose of Section 3(1A) was to encourage registration of persons required to be registered, not to penalise those exempt from registration under the law.

The bench also referred to an earlier Lahore High Court ruling involving Muhammad Arif Ice Factory, which was later upheld by the Supreme Court, and concluded that the Lahore High Court had incorrectly interpreted the law in the present case.

The FCC set aside the Lahore High Court's Dec 24, 2025 judgement as well as the orders issued by the tax authorities.