Income Tax and Sales Tax are two of the most prevalent taxes in Pakistan yet many people have a confusion between the two. The difference is simple: income tax is payable on income or profit, sales tax is payable on the supply or sale of taxable goods and some taxable services.

As mentioned by Advocate Shahid (Tax Attorney in Lahore). Income tax in Pakistan is regulated primarily by the Income Tax Ordinance, 2001 that FBR currently mentions to be amended up to 20 February 2026. The Sales Tax Act 1990 governs Federal sales tax on goods; FBR has updated the list of the Sales Tax Act 1990 up to 30 June 2025.

Income Tax vs Sales Tax in Pakistan

FBR’s IRIS portal also offers verification services such as, Active Taxpayer List for income tax, Active Taxpayer List for sales tax, Taxpayer profile inquiry, CPR Verification, POS invoice Verification and notices/orders Verification online.

What Is Income Tax in Pakistan?

Income Tax is a direct tax which is imposed on taxable income of a person. This can comprise salary earnings, business earnings, property income, capital gains, other earnings or company earnings.

An individual who is a salaried person receiving taxable salary can file his/her income tax return with FBR IRIS for example. The business owner can also submit an income tax return, and if necessary, a wealth statement of assets and liabilities, expenses and income sources.

What Is Sales Tax in Pakistan?

Sales tax is an indirect tax that’s levied on taxable supplies. It is the simple addition of the tax rate on taxable goods and/or services to the purchase price and the collection of the price from the buyer by the registered seller/service provider.

For instance, goods sold by a registered manufacturer is a taxable good and the registered manufacturer will issue an invoice for the sale of taxable goods called a sales tax invoice. The output tax is charged by the manufacturer on the sales and he can claim input tax adjustment on purchases (provided proper invoice and legally acceptable).

IRIS is responsible for the sales tax registration of FBR. A person logs on to IRIS portal by using the credentials and selects Form 14(1) for registering for Sales Tax Voluntary in the registration menu on IRIS portal as per FBR’s statement.

Main Difference Between Income Tax and Sales Tax

The greatest distinction is at the point of taxation.

• The income tax is levied on income. Focuses on the income of a person, business, AOP or company in a tax year.
• The taxable sale or supply is considered to be sales tax. It is related to invoices, goods taxable, taxable services, output tax, input tax and sales tax returns.
• Normally, income tax is to be paid by the taxpayer out of his/her own income. The usual way of collecting sales tax is from customers and then depositing it with the appropriate taxing authority. This is why income tax is classified as a direct tax and the sales tax is generally considered as an indirect tax.

Income Tax Return vs Sales Tax Return

• Generally, an income tax return is filed once a year. It reports details of income and deductions, tax credits, withholding tax, advance tax, assets and liabilities (if any), and wealth details if applicable.
• The return of sales tax is normally submitted by a registered person for a tax period. It consists of the Taxable Sales, Taxable Purchases, Output Tax, Input Tax, Adjustments, Tax Payable/Refundable.
• Someone can be an income tax filer, and not be sales tax registered. A person who is paid by salary can, for instance, get an income tax filing ID and show up on ATL but may not require a sales tax ID. Whether or not to register for sales taxes is dependent on the type of business, type of taxable activities, goods or services provided, and federal or provincial legislation.

NTN vs STRN: Which One Do You Need?

• NTN: National Tax Number. It’s associated with registering for income tax and taxpayer ID.
• STRN is an acronym for Sales Tax Registration Number. It’s associated with sales tax signing up and sales tax compliance.
• It is possible to have NTN without STRN. This is normal for those that are on a salary, a freelancer, consultant, or small business who do not have to register for sales tax.

If, however, a business is mandated to register for sales tax it needs to duly register and then would be required to issue legally registered invoice following the registration.

What Is ATL in Pakistan?

• ATL: Active Taxpayer List. FBR says that ATL is the master register of income tax return filers for the last tax year who had filed their returns online. The Federal Board of Revenue (FBR) is an autonomous body of the government.
• The status of ATL is important, as those who are active taxpayers normally enjoy better withholding tax benefits and are less likely to encounter any documentation issues for their business, banking, property, vehicle registration and official transactions.
• ATL does not mean that the business is “sales tax active.” One can be registered for income tax but not sales tax! Likewise, where sales tax compliance is applicable, then the sales tax active status needs to be verified separately.

FBR, PRA, SRB, KPRA and BRA: Which Authority Applies?

The income tax, federal sales tax on goods, sales tax on imports, NTN, STRN filing, federal notices and ATL verification are the major functions of FBR.

May apply – for services, depending on the province and the type of service. All the e-Registration, e-Payment creation, e-Taxpayer search and e-Active taxpayer verification functions are available in PRA for Punjab. SRB provides information regarding taxable services in Sindh, and also has its own e-Registration portal. KPRA claims to be collecting and levying Sales Tax on services and Infrastructure Development Cess in Khyber Pakhtunkhwa. BRA offers e-enrolment, e-filing and tax payment services to Balochistan’s service providers. (Punjab Revenue Authority)

Example: Income Tax vs Sales Tax for a Business

Assume that a company makes a profit on sales of products.

The business could be required to file an income tax return due to having business income. May also have to register for Sales Tax, issue sales tax invoices, file sales tax returns and deposit sales tax, if it is making taxable sales of goods and meets sales tax requirements.

Now let’s assume that a consultant is delivering the services in Punjab, Sindh, KP or Balochistan which is taxable. For the consultant, he can still file an income tax return with FBR, however, the service sales tax may be subject to PRA, SRB, KPRA and/or BRA as per the Province and service provided.

Common FBR and IRIS Problems

Many taxpayers have issues as it relates to registering and thinking that it is complete compliance. This is not a requirement of registering with NTN. Also important are filing the correct return, picking the correct tax year, reconciling income and checking ATL status.

Common issues include:

• ATL not active after filing return
• NTN not found in FBR record
• STRN not showing in IRIS
• Sales tax invoice not verifiable
• CPR not showing in IRIS
• Input tax adjustment disallowed
• Wrong tax year selected in IRIS
• FBR notice not replied on time
• Sales tax registration suspended
• Tax demand created in IRIS

What to Do If You Receive an FBR Notice

1. Read the notice date and deadline.
2. Identify the tax year or tax period.
3. Check the legal section mentioned in the notice.
4. Download the notice from IRIS.
5. Collect supporting documents.
6. Reconcile income, sales, purchases, bank records, invoices, and taxes.
7. Prepare a written reply with evidence.
8. Submit the reply through IRIS or the relevant portal.
9. Attend hearing if required.
10. File appeal within limitation if an adverse order is passed.

Common Mistakes to Avoid

• Don’t think that NTN is equivalent to full compliance of taxes. This is a NTN Registration Only course. The filing of tax and proper tax declaration is important.
• Make sure you don’t mix up income tax return and sales tax return. They do not stand in the place of one another, and each is a distinct responsibility.
• Never charge sales tax if not properly registered. This can lead to issues with the creation of invoices and comply with.
• Don’t forget provincial sales tax on services! Often service providers only have a concern for FBR and not PRA, SRB, KPRA or BRA obligations.
• Never file returns without reconciled. All of the bank records, sales/purchases, withholding tax, expenses and wealth statement details should be matching.
• Don’t Ignore Notices from FBR. Late or weak responses may lead to action and orders, tax demand or recovery.

When You Need a Tax Consultant or Tax Lawyer

If you require professional assistance with your routine compliance needs, you can file your income tax returns, register for your sales tax, register for your NTN, register for your STRN, file your IRIS, register for your PRA, register for your SRB, file your KPRA or comply with your BRA.

It is highly recommended to take legal assistance in case of FBR notices, tax audit, penalty cases, assessment orders, sales tax recovery cases, blacklisting cases, input tax disallowance cases, Commissioner Inland Revenue cases, Commissioner Appeals cases, or Appellate Tribunal Inland Revenue cases.

Final Summary

Income tax is levied on income whereas sales tax is levied on taxable supply of goods/services. The income tax is primarily associated with NTN, income tax return filing, wealth statement and ATL. STRN, sales tax invoices, input tax, output tax and sales tax returns are all related to sales tax.

FBR is responsible for income and national sales tax issues. Depending upon the province, PRA, SRB, KPRA and BRA might apply to the sales tax on services. If you do get a notice, penalty, assessment order or recovery notice, please be careful and respond in a timely fashion.

FAQs About Income Tax and Sales Tax in Pakistan

1. What is the main difference between income tax and sales tax?

Income tax is based on income subject to taxation, sales tax is based on goods and/or services subject to taxation and provided to customers.

2. Is income tax a direct tax?

Yes. Income tax is a direct tax as it is collected from the taxpayer from his/her income.

3. Is sales tax an indirect tax?

Yes. Normally sales tax is considered an indirect tax because it is paid by the consumer, collected by the seller and then paid to the tax authority.

4. Do I need NTN for income tax filing?

Yes. People generally have a registration based on CNIC number and companies, AOPs and businesses have a registration based on NTN number for tax purposes.

5. Do I need STRN for sales tax filing?

Yes, if you have to register for sales tax purposes. STRN is an essential part of sales tax compliance, and a necessary component of providing accurate sales tax invoices.

6. Can I be an income tax filer but not sales tax registered?

Yes. If the sales tax registration is not applicable, many salaried individuals, freelance, consultants and small businesses can file their income tax returns without getting registered for sales tax.

7. Is sales tax paid to FBR or provincial authorities?

FBR has the authority to collect sales tax on goods in general. PRA, SRB, KPRA or BRA can deal with the sales tax on the services depending on the type of services and province.

8. When should I contact a tax lawyer?

In case of receipt of FBR notice/ audit notice/ assessment order/ tax demand/ penalty notice/ recovery notice or if you are faced with the case of appeal, you should immediately reach out to a tax lawyer.