Used and second-hand goods: how sales tax applies

Trading in used goods — machinery, vehicles, electronics, furniture — raises a natural question: does sales tax apply the same way as it does to new goods? For a business, the answer is largely yes. The rules do not exempt goods just because they are second-hand. But who is selling, and what the goods are, both matter, and a few categories carry their own special treatment.

A dealer's sales are taxable

The starting point is that a supply of taxable goods by a registered person in the course of business is taxable whether the goods are new or used. Being second-hand does not, by itself, take goods out of the sales tax net. So a dealer trading in used goods generally charges sales tax on the value of the sale, in the same way as a dealer in new goods. Pakistan does not operate a broad margin scheme that would tax only the dealer's mark-up on used goods; the tax generally attaches to the value of the supply, subject to any specific rules for particular goods. A used-goods business should therefore expect to be within the same regime as any other goods business, not outside it.

Private sales are outside the net

The important qualifier is who is selling. Sales tax applies to supplies made in the course of an economic activity by a registered person. An individual selling their own used personal item — a family car, some furniture, an old phone — is not making a supply in the course of business and is not a registered supplier. That private sale is outside the sales tax net. So the second-hand nature of the goods is not what determines the tax; the character of the seller and the transaction is. A private disposal is untaxed; a dealer's sale of the same item is taxable. This distinction is what stops ordinary people selling their used belongings from being drawn into sales tax while keeping used-goods traders within it.

Special cases like vehicles

Some categories carry their own rules. Used or reconditioned vehicles, in particular, are commonly subject to their own valuation bases or rate rules rather than the ordinary approach, and other specific goods may have fixed values or special treatment set by FBR. Because these regimes are specific and change, the treatment of used vehicles and similar goods should be checked against the current rules rather than assumed to follow the general position. The safe approach for a dealer in a category like vehicles is to confirm the applicable valuation and rate before pricing, because the special rules can differ materially from the standard treatment.

Common mistakes

• Assuming used goods are automatically exempt because they are not new.
• Expecting a margin-only basis that Pakistan does not generally operate for used goods.
• Treating a dealer\'s used-goods sales as if they were private, untaxed disposals.
• Applying the ordinary basis to used vehicles instead of their specific valuation or rate rules.

Where it fits

Used-goods treatment sits near the sale of scrap and by-products and the disposal of obsolete stock, both of which are taxable supplies in their own right. Whether you must charge at all depends on being a registered person, and the mechanics rest on input and output tax. A dealer charges; a private seller does not.

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.

• Sales Tax Act 1990, amended through 30 June 2026 (FBR)
• Sales Tax Basics (FBR)

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