The Federal Board of Revenue (FBR) will charge 19 percent sales tax (17 percent sales tax plus two percent further tax) on supply of software to unregistered persons. In this regard, the FBR has issued a sales tax clarification to the Chief Commissioners of Large Taxpayer Unit and Regional Tax Offices (RTOs) on the taxability of software under Sales Tax Act 1990.
According to the FBR's clarification, all softwares falling under Chapter 85 to the Pakistan Customs Tariff, are chargeable to standard rate of sales tax at 17% on their import as well as on local supply, despite sales tax exemption provided to "Laptop computers, notebooks whether or not incorporating multimedia kit and personal computers" which fall in Chapter 84 of the Pakistan Customs Tariff. It is also clarified that supplies of taxable goods to the un-registered persons are also chargeable to further tax @2% under section 3(1A) of the Sales Tax Act, 1990.
In view of this, supply of softwares is chargeable to sales tax @17% under section 3(1) of the Sales Tax Act, 1990. Moreover, further tax @2% is also to be charged on the supplies made to unregistered persons in addition to the standard rate of sales tax, the FBR added.
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