Net sales tax payable after the input tax credit.
Net sales tax payable
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Output tax (sales)
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Input tax (purchases)
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Sales tax is a relay, not a cost you swallow
A registered business does not actually bear the sales tax it charges. It collects tax on its sales, the output tax, and it pays tax on its purchases, the input tax. At return time it hands the Federal Board of Revenue (FBR) only the difference. The tax it already paid to suppliers is credited back. This is what stops tax piling on tax at every link of a supply chain, and it is the single idea this calculator turns into a number. Get the relay wrong and you either overpay the FBR or, worse, under-declare and invite a penalty.
The standard rate this tool applies to both sides is 18 percent. That figure is set by federal law and revised through the annual Finance Act, so confirm the current standard rate with the FBR before filing a return. The credit mechanism itself is long-standing and reliable to plan around.
Goods are federal, services are provincial
Here is the distinction that trips up new businesses, and it is worth stating plainly. The 18 percent in this calculator is the federal sales tax on goods, administered by the FBR. Services are a different world: they are taxed by the province where the service is supplied, through the Sindh Revenue Board, the Punjab Revenue Authority, the Khyber Pakhtunkhwa Revenue Authority, or the Balochistan Revenue Authority, and their standard rates differ from the federal goods rate. A business that sells services should not assume the 18 percent goods rate applies, and one that does both goods and services may juggle more than one authority. This tool models the federal goods side; for services, check the rate of the relevant provincial authority.
A trader with PKR 5 million of sales
Take a registered trader who sells PKR 5 million of taxable goods in a period and buys PKR 3 million of taxable goods to do so, using the rate this calculator applies. Output tax is 18 percent of 5 million, or PKR 900,000. Input tax is 18 percent of 3 million, or PKR 540,000. The trader remits the difference, PKR 360,000, to the FBR. The PKR 540,000 already paid to suppliers is not lost; it offsets what is owed. So although PKR 900,000 was collected from customers, only PKR 360,000 leaves the business as net tax.
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The chart sets output and input side by side, with the slim net bar on the right showing what actually changes hands. The taller the input bar grows relative to output, the thinner that net bar becomes.
When input tax runs ahead of output
Some periods flip the usual picture. A business that stocks up heavily, buys capital equipment, or exports at a zero rate can pay more input tax than it collects in output tax. When that happens the difference is not a negative bill you somehow benefit from in cash. It becomes a credit that carries forward to the next period or, in eligible cases such as exports, can be claimed as a refund from the FBR. This calculator floors the net payable at zero precisely because a registered person never pays a negative amount; the surplus simply sits as a credit. Refund claims have their own evidence and timing rules, so treat a recurring input surplus as a signal to talk to a tax adviser.
This tool is for registered traders, manufacturers, and finance staff who need a quick read on a period's net liability before the formal return is prepared. It assumes every rupee of input tax is claimable, which is the clean case. In reality some input tax is disallowed or apportioned, and only purchases backed by valid tax invoices from registered suppliers qualify, so the formal return can differ from this estimate.
Can I claim input tax on every purchase my business makes?
No. Only input tax on taxable purchases used for taxable supplies, supported by a proper sales tax invoice from a registered supplier, is generally claimable. Certain categories are disallowed outright, and where you make both taxable and exempt supplies the input tax is apportioned. The FBR sets these rules and they change, so this tool's clean assumption is a starting estimate, not the final return position.
What happens to a carried-forward credit, does it expire?
A surplus of input over output normally carries forward and reduces the next period's net payable until it is used up. Genuine refund situations, like exports, follow a separate claim process with its own documentation. Because the carry-forward and refund rules are set by the FBR and can be revised, confirm the current treatment before relying on a large credit.