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Sales Tax on Services in KP
| Service Category | Rate | Notes | Reference |
|---|---|---|---|
| Software development (PSEB registered) | 0% (Zero-rated) | IT/ITeS exporters | |
| IT-enabled services (BPO, data processing) | Exempt/Concessionary | PSEB-registered companies | |
| General IT consulting | 15% | Standard rate | |
| Telecommunication services | 19.5% | All telecom | |
| General taxable services | 15% | Default rate per KP Sales Tax Act 2013 |
| Step | Action | Reference |
|---|---|---|
| 1 | Visit KPRA online portal and create account | |
| 2 | Fill registration form with business and service details | |
| 3 | Upload required documents (CNIC, NTN, business registration) | |
| 4 | Receive KPRA registration number upon approval | |
| 5 | File monthly sales tax return | |
| 6 | Pay tax via designated bank or online channels | |
| 7 | Verify ATL status on FBR website |
The Khyber Pakhtunkhwa Revenue Authority (KPRA) is the provincial revenue authority established under the Khyber Pakhtunkhwa Finance Act, 2013. It administers the Khyber Pakhtunkhwa Sales Tax on Services Act, 2013 and is responsible for collecting sales tax on services rendered within the province of Khyber Pakhtunkhwa. IT companies providing services in KP must register and comply with KPRA requirements.
KPRA follows a tiered tax rate structure for services, with significant concessions for IT and IT-enabled service providers. PSEB-registered companies enjoy zero-rated or exempt status for export-oriented IT services.
| Service Category | Rate | Notes |
|---|---|---|
| Software development (PSEB registered) | 0% (Zero-rated) | IT/ITeS exporters with valid PSEB registration |
| IT-enabled services (BPO, data processing) | Exempt/Concessionary | Notification-based exemptions for PSEB-registered companies |
| General IT consulting | 5% (Digital) / 2% (BPO) | Standard KP SST rate per KP Finance Act applies to domestic IT services |
| Telecommunication services | 19.5% (Provincial telecom) | All telecom services including mobile, broadband, and fixed-line |
| General taxable services | 5% (Digital) / 2% (BPO) | Default KP SST rate per KP Finance Act for services not specifically listed |
| Freelance IT services (domestic) | 5% (Digital) / 2% (BPO) | Standard KP SST rate per KP Finance Act unless PSEB registered |
| Cloud/hosting services | 5% (Digital) / 2% (BPO) | Standard rate per KP Finance Act; may qualify for exemption if PSEB registered and export-oriented |
All service providers in KP with annual turnover above the threshold must register with KPRA. The process is fully online.
Monthly sales tax returns must be filed through the KPRA portal. The return covers all taxable services provided during the preceding month.
| Requirement | Details |
|---|---|
| Filing Frequency | Monthly |
| Return Due Date | 18th of the following month |
| Payment Method | Designated banks or online channels via KPRA portal |
| ATL Verification | Verify Active Taxpayer List status on FBR website |
| E-Filing | Mandatory through KPRA online portal |
| Violation | Penalty |
|---|---|
| Non-registration | Fine + back taxes + interest from due date |
| Late filing of return | Rs. 500 (KP) per day of default |
| Non-payment of tax | Tax amount + default surcharge |
| Failure to issue invoice | Fine up to Rs. 10,000 (per §39 KP STS Act 2022) (KP) |
| False/fraudulent return | Prosecution + fine + 100% of evaded tax amount |
| Non-maintenance of records | Fine up to Rs. 37,000 (per §39 KP STS Act 2022) (KP) |
| Authority | Province | Website |
|---|---|---|
| SRB | Sindh | srb.gos.pk |
| PRA | Punjab | PRA — PSTS Act 2012 |
| KPRA | Khyber Pakhtunkhwa | kpra.kp.gov.pk |
| Bal-RA | Balochistan | bra.gob.pk |
| Tax | Rate | Jurisdiction | Conditions | Reference |
|---|---|---|---|---|
| Corporate Tax (PSEB IT export) | 0.25% | Federal/ICT | PSEB + 80% export revenue | ITO §154A |
| Corporate Tax (domestic IT) | 20% | Federal/ICT | Standard corporate rate | ITO §154 |
| WHT Export Remittance (PSEB) | 0.25% | Federal/ICT | PSEB-registered | ITO §154A |
| WHT Export Remittance (non-PSEB) | 1% | Federal/ICT | No PSEB registration | ITO §154A |
| WHT Domestic Services | 3-8% | Federal/ICT | Standard service withholding | ITO §153 |
| Startup Tax Credit | 100% for 3 years | Federal/ICT | PSEB mandatory, <PKR 100M | ITO §65F(b) |
| SEZ Tax Holiday | 10-year income tax 0% | Federal/ICT | SEZ-registered companies | SEZ Act 2012 / BOI |
| SST Sindh — IT concessional | 3% | Sindh | Software dev, CPC 83100 | SRB Notification July 2025 (CPC 83100, sub-rule 1A) |
| SST Sindh — IT export (PSEB) | 0% | Sindh | PSEB + 80% export | SRO 981(I)/2015 (exemption for PSEB-registered IT exporters) |
| SST Sindh — Standard | 15% | Sindh | Default rate | Sindh Sales Tax on Services Act 2011 §4 |
| SST Punjab — IT-Enabled Services | 0% (Zero-Rated) | Punjab | Hosting, maintenance, data processing | Punjab Sales Tax on Services Act 2012, PRA Notification (0% (Zero-Rated) for domestic IT) |
| SST Punjab — Software Dev | 0% (zero-rated) | Punjab | Pure software development | Punjab Sales Tax on Services Act 2012, Notification per PRA directive |
| SST Punjab — IT export (PSEB) | 0% | Punjab | PSEB + 80% export | SRO 981(I)/2015 (extended to Punjab) |
| SST Punjab — Standard | 16% | Punjab | Default rate | Punjab Sales Tax on Services Act 2012 §4 |
| SST KP — IT concessional | 2-5% | KP | PSEB-registered IT | KP Finance Act (annual), Notification per KPRA |
| SST KP — IT export (PSEB) | 0% | KP | PSEB + 80% export | SRO 981(I)/2015 (extended to KP) |
| SST KP — Standard | 15% | KP | Default rate | KP Finance Act (annual) |
| SST Balochistan — IT export | 0% | Balochistan | PSEB + export | SRO 981(I)/2015 (extended to Balochistan), per BRA notification |
| SST Balochistan — Standard | 15% | Balochistan | Default rate | Balochistan Sales Tax on Services Act 2015 |
| SST Telecom (all provinces) | 19.5% | All provinces | Mobile, internet, fixed-line | Provincial Acts |
| Section 6A digital tax (1% digital / 2% CoD) | 1% digital / 2% CoD | Federal/ICT | Online marketplace collection | ITO 2001 §6A (inserted by Finance Act 2025) |
| EOBI | 5% employer + 1% employee | Federal/ICT | 5+ employees, PKR 37,000/mo ceiling (EOBI Act & Rules) | EOBI Act 1976 |
| SESSI (Sindh) | 6% employer + 1% employee | Sindh | 5+ employees | SESSI Act |
| PESSI (Punjab) | 6% employer + 1% employee | Punjab | 5+ employees | PESSI Ord. 1965 |
| Workers Welfare Fund | 2% of income > PKR 500K | Federal/ICT | 5+ employees, annual | WWF Ord. 1969 |
| 50% FCY Retention | Retain export proceeds in FCY | Federal/ICT | All IT exporters | SBP FECL 05/2026 — Foreign Exchange |
| 100% Foreign Ownership | IT sector allows 100% foreign equity | Federal/ICT | All IT companies | BOI Investment Policy 2023 |
| Duty-Free IT Equipment | 0% customs duty | Federal/ICT | PSEB-registered | PSEB / SRO 488(I)/2013 |
| Body | Role | Website |
|---|---|---|
| FBR / IRIS | Income tax filing, WHT, ATL status | iris.fbr.gov.pk |
| SECP / LEAP | Company registration, annual returns | leap.secp.gov.pk |
| PSEB | IT registration, 0.25% WHT, duty exemptions | pseb.org.pk |
| SBP | FCY retention, EFS, Cyber Shield (Mar 2026) | sbp.org.pk |
| PTA | Telecom licensing, 5G, DIRBS | pta.gov.pk |
| SECP | Corporate governance, company law | secp.gov.pk |
| NADRA | Digital identity (PakID: 15.4M downloads) | nadra.gov.pk |
| WeBOC | Electronic customs declarations | weboc.gov.pk |
| Roshan Digital Account | Overseas Pakistani investment | roshandigitalaccount.com |
| Raast | Instant payment system | raast.pk |
| STZA | Special Technology Zones | STZA — Act & Rules |
| BOI | Investment policy, 100% foreign ownership | invest.gov.pk |
| PPRA | Government procurement (EPADS V2.0) | PPRA — Rules & Regulations |
| FIA Cybercrime | PECA enforcement, Helpline 1991 | cybercrime.gov.pk |
| EOBI | Federal pension: 5%+1% | eobi.gov.pk |
| SRB | 0% | srb.gos.pk |
| PRA | Punjab SST: 0% (Zero-Rated) IT / 0% PSEB export | PRA — PSTS Act 2012 |
| KPRA | KP SST: 2-5% IT / 0% PSEB export | KPRA — Acts & Notifications |
| BRA | Balochistan SST: 0% PSEB IT export | bra.gob.pk |
| Service | SST Rate | Input Tax Adjustment | Legal Basis |
|---|---|---|---|
| Digital Services | 2% (KP) | No | KP Finance Act, Notification per KPRA |
| IT/Software Consulting | 5% (KP) | No | KP Finance Act |
| Telecommunication (all sub-types) | 19.5% (KP) | Yes | KP Finance Act (annual) |
| IT Agents / Commission Services | 5% (Digital) / 2% (BPO) | Yes |
The Place of Provision of Services Rules 2023 determine which province collects tax:
Under KP Withholding Regulations 2024, these entities must withhold KP SST:
Rs. 30.6 billion collected in FY 2022-23 — KPRA is the province's leading revenue authority with data analytics-driven enforcement.
KPRA Annual Report 2022-23 »The Khyber Pakhtunkhwa Sales Tax on Services Act, 2022 (Act No. XIX of 2022) was passed by the Provincial Assembly on 3rd June 2022 and assented to by the Governor on 12th June 2022. Amended through KP Finance Act 2024.
| Section | Subject |
|---|---|
| §5 | Scope and charge of tax |
| §10 | Payment of tax and file return |
| §11 | Exemptions |
| §27 | Returns and record-keeping |
| §37 | Audit powers |
| §39 | Offenses and penalties |
| §43 | Appointment of officers |
| §80 | E-intermediary (electronic filing) |
Effective 5th August 2020 vide Notification No: BO(Res-III) FD/2-2/2019-20/Vol-I — Second Schedule.
| Service Category | Rate (KP) | Tariff Heading |
|---|---|---|
| Standard rate (most services) | 15% | Various |
| Telecommunication services | 19.5% | 9813.xxxx |
| Non-corporate hotels/marriage halls | 8% (no ITC) | 9801.xxxx |
| Hotels with RIMS installed | 5% (no ITC) | 9801.xxxx |
| Caterers | 10% (no ITC) | 9801.xxxx |
| Dhabha/traditional restaurants | 1% (no ITC) | 9801.xxxx |
| Beauty/Health/Gyms | 5% (no ITC) | 9811.xxxx |
| Medium launderers (stand-alone) | 2% (no ITC) | 9808.xxxx |
| Hostels (students) | Exempt | 9801.xxxx |
| Franchise services | 10% | Various |
KPRA Regulation No. III of 2024 — No. FD/KPRA/2023, dated 22nd November 2024.
| Action | Deadline |
|---|---|
| Registration changes | 7 days |
| De-registration application | 10 days |
| Return filing | 15 days after tax period |
| Appeal filing | 90 days |
| PSID generation | 3 days before payment |
KPRA Regulation No. I of 2024 — KPRA/WH-REG/2024/1424, dated 8th November 2024.
Under §4, §10, §21, §27, §29, §37, §39 of the KP STS Act 2022.