GST vs FED vs Income Tax in Pakistan - What's the Difference?

The 30-Second Summary

Aspect	GST (Sales Tax)	FED	Income Tax
Type	Indirect	Indirect	Direct
Charged on	Supply of goods & services	Specific "excisable" goods/services	Income / profit earned
Governing Law	Sales Tax Act, 1990	Federal Excise Act, 2005	Income Tax Ordinance, 2001
Authority	FBR (goods) + Provincial boards (services)	FBR	FBR
Standard Rate 2026	18%	Varies (mostly 10% - 20%)	Slab-based (0% - 35%)
Who Bears It	Final consumer	Final consumer	The earner (individual / business)
Filing Frequency	Monthly	Monthly	Annually

Direct vs Indirect Tax - The First Distinction

All three taxes split into two families:

• Direct tax is a tax you cannot pass on to someone else. Income tax is the classic example - if you earn salary or business profit, you personally pay tax on it.
• Indirect tax is one that is collected from you but ultimately borne by the end consumer. GST and FED are both indirect taxes. A manufacturer might cut the cheque to FBR, but that cost is built into the price you pay at the till.

GST (General Sales Tax) in Detail

GST is technically called Sales Tax in Pakistani law. The "GST" label comes from the way most countries structure this tax - as a value-added tax charged at every stage of supply. The governing statute is the Sales Tax Act, 1990.

Key Features

• Charged on supply of goods (and in some cases services) at every stage - import, manufacturing, wholesale, retail.
• Standard rate in 2026 is 18%, with reduced rates for specific items and zero-rating for exports.
• Businesses can claim input tax credit - they only pay FBR the difference between output tax and input tax.
• Services are taxed by provincial authorities (PRA, SRB, KPRA, BRA) at rates generally between 13% and 16%.
• Registration is compulsory above a turnover threshold or for Tier-1 retailers, manufacturers, importers and exporters.

Who Pays GST

On paper, the registered seller pays GST to FBR each month. In reality, the seller adds it to the invoice so the buyer actually funds the tax. At the end of the chain, the final consumer carries the full burden - that's you and me when we buy a phone, pay an internet bill or fill up at a branded pharmacy chain.

For a detailed breakdown of GST, see our Complete Guide to Sales Tax in Pakistan 2026.

FED (Federal Excise Duty) in Detail

FED is the tax most people have heard of but few understand. It is governed by the Federal Excise Act, 2005, and charged on specific goods and services notified in the First Schedule of that Act.

What FED Is Charged On

FED applies to a narrow but commercially important list, including:

• Cigarettes and tobacco products.
• Aerated beverages and certain sugary drinks.
• Cement.
• Motor vehicles (certain categories, especially imports and higher-engine capacity cars).
• Air travel tickets for international flights.
• Telecommunication services (where charged in sales tax mode in Islamabad).
• Banking and insurance services in certain cases.
• Edible oil, lubricants and certain other notified goods.

How FED Is Applied

FED can be charged in two different ways:

1. In sales tax mode: FED is added to the invoice just like sales tax, and businesses can claim input adjustment. Common for telecom services and certain banking services.
2. Ad valorem / specific duty: FED is charged as a fixed amount per unit (e.g. per 1,000 cigarettes) or as a percentage of the retail price. This is the traditional excise model - no input adjustment, it becomes a cost built into the final price.

FED Rates in 2026 (Examples)

Item / Service	Typical FED
Telecom services (Islamabad)	19.5% on charges
Cement	Per-kg specific rate (updated in budget)
Aerated/sugary beverages	20% ad valorem
Cigarettes (Tier 1)	Fixed rate per 1,000 cigarettes (highest bracket)
International air tickets (economy)	Fixed per-ticket amount by zone
Motor vehicles (large engine)	Varies by engine capacity

FED rates change regularly through Finance Acts and SROs. Always verify the current rate for your specific item before pricing or invoicing.

Income Tax in Detail

Income tax is the direct tax on earnings of individuals, AOPs and companies. It is governed by the Income Tax Ordinance, 2001 and the annually updated Finance Act.

Who Pays Income Tax

• Salaried individuals - tax deducted at source by the employer.
• Business owners - on net profit after allowable expenses.
• Freelancers, consultants, doctors, lawyers - on professional income.
• Companies - at 29% corporate tax rate (2026) plus super tax in certain cases.
• AOPs / partnerships - at slabs that differ from both individuals and companies.
• Non-residents - only on income sourced in Pakistan.

Key Features

• Charged on net income after deductions and allowances.
• Slab-based for individuals and AOPs, flat rate for companies.
• Filed once a year through IRIS (tax year ends 30 June for most taxpayers).
• Collected through withholding at source, advance tax and final tax on the return.
• Failure to file keeps you on the "non-filer" list, attracting higher withholding rates on banking, property, vehicles and more.

Salary Tax Slabs 2025-26 (Quick Reference)

For full details see our FBR Salary Tax Slabs 2025-26 guide. In short:

• Up to Rs. 600,000 annual salary - 0%.
• Above this, progressive slabs starting from around 1% and rising up to the top bracket for high earners.

A Real Example - One Mobile Bill, Three Taxes

Take a simple monthly mobile bill of Rs. 1,000. Here is how each tax touches it:

Where the Three Taxes Overlap

1. Businesses Pay All Three

A typical registered manufacturer in Pakistan files:

• Monthly sales tax return (GST).
• Monthly FED return if they sell excisable goods like cement or beverages.
• Monthly withholding tax statements under Income Tax for salaries paid to staff and payments made to suppliers.
• Annual income tax return on the company's profit.
• Provincial sales tax returns if any services are provided.

That is easily 60+ returns per year for one mid-size manufacturer.

2. The Same Invoice Can Carry Multiple Taxes

A branded restaurant bill in Karachi typically shows:

• Food / service charges: Base amount.
• SRB sales tax on services: 8-15% depending on payment mode.
• No GST under FBR (because services are a provincial subject in Sindh).
• No FED (generally).
• Your income tax? That is paid separately by you on your annual return, unrelated to this meal.

3. Import of a Vehicle

Importing a car triggers:

• Customs duty (not covered here, but paid first).
• Sales tax (GST) at 18% on the assessed value + duty.
• FED at engine-capacity-based rates.
• Advance income tax at import stage (adjustable against annual income tax).
• Provincial token/vehicle tax when you register it.

That is why the landed cost of an imported vehicle is far higher than the sticker price abroad.

Side-by-Side Decision Table - Which Applies to You?

You Are...	GST?	FED?	Income Tax?
Salaried employee	No (as end consumer, you bear it silently)	No	Yes - annual return
Freelancer / consultant	Maybe - provincial sales tax on services if above threshold	No	Yes - annual return
Small shopkeeper (non Tier-1)	Usually no, if below threshold	No (unless selling excisable items)	Yes
Tier-1 retailer / big shop	Yes - monthly	Possibly	Yes
Manufacturer	Yes - monthly	If excisable item (cement etc.)	Yes
Importer	Yes (at import + monthly return)	If excisable item	Yes
Private limited company	Yes (if dealing in goods)	Varies	Yes - corporate

Filer vs Non-Filer - A Cross-Cutting Concept

Technically, "filer" status refers to being on the Active Taxpayer List (ATL) for income tax. But because Pakistan uses filer status as a behavioural lever, being a non-filer inflates your cost across all three taxes:

• Income tax: Higher withholding rates on banking transactions, property, vehicles, dividends, cash withdrawals etc.
• Sales tax: Selling to an unregistered buyer triggers 4% further tax - the seller often passes this on, making non-filers pay more at the till.
• FED: Usually flat, but filer status still affects the income tax piece on the same invoice.

For the full picture see our guide to Filer vs Non-Filer Pakistan.

Which Tax Should You Focus On First?

Common Myths, Debunked

Useful Official Resources

FBR Helpline: 051-111-772-772
IRIS Portal: iris.fbr.gov.pk
Sales Tax Act, 1990 / Federal Excise Act, 2005 / Income Tax Ordinance, 2001: All available in full text on download1.fbr.gov.pk.

Important Disclaimer

Tax rates, schedules and the exact scope of GST, FED and income tax change regularly through Finance Acts, SROs and provincial enactments. The comparisons in this article are based on the position understood for the 2025-26 tax year and are provided for educational purposes only. Always confirm the current rate applicable to your specific product, service or income type on the FBR website or with a qualified tax professional before making business or filing decisions.