Software and IT services: sales tax across the provinces

Pakistan's software and IT sector sells nationwide and abroad, which makes its sales tax position more involved than a single-location business. IT services are provincial, the rates often differ from the standard, and clients spread across provinces can pull a firm into several jurisdictions at once. This guide sets out the framework a software house or IT services provider needs.

IT services are provincial services

Software development and IT or IT-enabled services (ITeS) are services, not goods. They therefore fall under provincial sales tax administered by the authority for the province where the service is rendered — SRB in Sindh, PRA in Punjab, KPRA in Khyber Pakhtunkhwa, BRA in Balochistan — while services rendered in Islamabad fall under FBR under the ICT services regime. This sits separately from the federal sales tax on goods and from the income tax the business pays. A software house that thinks of itself as an "FBR taxpayer" for income tax still has its sales tax on services obligation sitting with the province.

Reduced rates for IT

A distinctive feature of the sector is that several provinces apply a reduced rate to IT and IT-enabled services rather than the standard provincial rate, and Islamabad has a specific lower rate for certain IT services. Reduced rates are attractive, but they usually carry a trade-off: input tax adjustment is generally not available on reduced-rate services, so a firm on the reduced IT rate typically cannot claim input tax on its purchases the way a standard-rated business can. Whether the reduced rate is worthwhile depends on the firm's cost base, and the exact rate and its conditions vary by province and change, so they should be confirmed with the relevant authority rather than assumed. The headline point is that IT is frequently a reduced-rate service, not a standard-rate one.

Clients across provinces

Because sales tax on services turns on where the service is rendered or the client is located, an IT firm serving clients across the country can fall under multiple authorities and need multiple registrations — one per province where it has a taxable presence, plus FBR for Islamabad clients. A Lahore-based development shop billing a Karachi client may face Sindh's regime on that engagement, not only Punjab's. This place-of-provision analysis is central to IT compliance and is where fast-growing firms most often fall behind, having registered in their home province but not where their clients are. Building the province logic into contracts and invoicing from the start avoids a messy catch-up later.

Common mistakes

• Treating IT services as an FBR matter for sales tax, when services are provincial.
• Applying the standard rate where a reduced IT rate is available, or vice versa.
• Claiming input tax while on a reduced-rate regime that does not allow it.
• Registering only in the home province and ignoring clients elsewhere.

Where it fits

This complements the wider software-house tax compliance picture and rests on the federal-versus-provincial divide. For the province-by-province detail, see the overviews for Punjab (PRA) and Sindh (SRB). IT is a provincial, often reduced-rate, frequently multi-province service.

Where the rate actually comes from

IT and IT-enabled services are one of the categories most likely to sit on a reduced rate rather than the standard one, and the reduced rate frequently comes with an input tax restriction attached. That makes the schedule entry, not the headline percentage, the figure to work from.

The standard rate is 16 per cent in Punjab and 15 per cent in Sindh, Khyber Pakhtunkhwa and Balochistan, with telecommunication services higher at 19.5 per cent and Islamabad Capital Territory administered by FBR. Sindh has also moved from a positive list to a negative list, so a Sindh service is taxable unless it is specifically exempt — if you concluded some years ago that you were outside the net, that conclusion needs re-testing. The full picture is in the rates by province guide; the authoritative figure for your own category is in the current working tariff published by Sindh Revenue Board or the authority for your province.

Source check: 14 September 2026. Standard provincial rates and the Sindh negative-list reform are sourced in the rates-by-province guide. The category treatment described above is general orientation and has not been confirmed line by line against any authority's current schedule — read your own entry in the applicable working tariff before invoicing.

Sources

This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.

• Sindh Revenue Board
• Punjab Revenue Authority sales tax guidance
• Khyber Pakhtunkhwa Revenue Authority
• Balochistan Revenue Authority
• Sales Tax Basics (FBR)

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