What is the 3% value addition sales tax charged on commercial imports, and who is exempt from it?

What does the law say?

Section 7A(2) of the Sales Tax Act, 1990 says that for goods in the Twelfth Schedule, “the minimum value addition tax, against the value added by the registered person, shall be payable” at the rate and by the persons specified in that Schedule. The Federal Government can amend the Schedule by notification.

The Twelfth Schedule has a single entry:

S. No.	Goods	PCT heading	Rate
1	All imported goods subject to exclusions as in conditions and procedure given after the Table	Respective heading	3% ad valorem

Paragraph (1) of the procedure says this value addition tax is “levied and collected at import stage from the importers on all taxable goods” chargeable under section 3, “in addition to the tax chargeable under section 3”. Section 3(1)(b) already charges 18% on goods imported into Pakistan. So for goods caught by the Schedule, sales tax at import is 18% plus 3%.

The Schedule itself says “all imported goods”, not only commercial imports. In practice the exclusions carve out most imports by manufacturers for their own use, which is why the tax falls mainly on goods imported for resale.

Who is exempt from it?

Paragraph (2) of the Schedule lists goods on which it is not charged:

1. raw materials and intermediary goods imported by a manufacturer for in-house consumption, excluding compressor scrap (7204.4940), motor scrap (7204.4990) and copper cable cutting scrap (7404.0090);
2. petroleum products in Chapter 27 imported by a licensed oil marketing company for sale in the country;
3. registered service providers importing goods for in-house business use, not intended for further supply;
4. cellular mobile phones or satellite phones (8517.1419, 8517.1430 and 8517.1390);
5. LNG / RLNG;
6. second hand and worn clothing or footwear (6309.000);
7. gold, in un-worked condition;
8. silver, in un-worked condition;
9. Third Schedule goods on which tax is paid on retail price basis;
10. plant, machinery and equipment in Chapters 84 and 85 of the Customs tariff imported by a manufacturer for in-house installation or use;
11. electric vehicle CKD kits for small cars or SUVs (50 kwh battery or below) and LCVs (150 kwh or below), “till 30th June, 2026”;
12. the same electric small cars, SUVs and LCVs in CBU condition, also “till 30th June, 2026”;
13. electric 2 and 3 wheelers and heavy commercial vehicles in CBU condition, “till 30th June, 2025”;
14. motor cars of cylinder capacity up to 850cc.

Items 11 to 13 carry their own end dates, which have passed on the text as amended to 30 June 2026.

What changed in 2026?

The Finance Act, 2026 made two changes to the Schedule:

• Same-state resale by manufacturers. A proviso to exclusion (i) says the manufacturer is liable to pay 3% value addition tax on the imports, “along with default surcharge, in case the imported goods are supplied in the same state whether in the same packing, repacked, or in bulk”. This applies apart from any other liability under the Act.
• Coal for power producers. New paragraph (6) sets the rate at 1% for imported coal, on condition that it is “exclusively and directly supplied to Independent Power Producers”.

How is it adjusted?

Paragraph (3) says the value addition tax paid at import forms part of input tax, and the importer deducts it from output tax for the tax period, subject to the Act’s limits. Excess input tax is carried forward. Section 7(2)(ii) requires the importer to hold the goods declaration in its name showing its sales tax registration number before claiming input tax on imports.

Paragraph (4) limits refunds: excess input tax attributable to this tax “shall not be refunded to a registered person in any case, except that as used for making of zero-rated supplies”. Paragraph (5) lets a registered person that also deals in goods other than imported goods claim a refund of carried-forward input tax only after deducting the amount attributable to tax paid at import.

Worked example (illustrative figures)

Rukhsana Enterprises, a registered trader in Lahore, imports kitchen appliances for resale. Assume they are not in the Third Schedule and not excluded. Value of the import for sales tax (customs value plus customs duties): Rs. 3,000,000.

1. Sales tax under section 3 at 18%: Rs. 3,000,000 x 18% = Rs. 540,000.
2. Value addition tax at 3%: Rs. 3,000,000 x 3% = Rs. 90,000.
3. Total sales tax paid at import: Rs. 630,000.
4. She sells the whole consignment in the same month for Rs. 3,600,000 plus sales tax. Output tax: Rs. 3,600,000 x 18% = Rs. 648,000.
5. Input tax on the import: Rs. 630,000. Net payable with the return: Rs. 648,000 - Rs. 630,000 = Rs. 18,000.

If she had sold for Rs. 3,400,000 instead, output tax would be Rs. 612,000, and the Rs. 18,000 of excess input tax would be carried forward, not refunded, under paragraphs (3) and (4).

Common mistakes

• Treating it as a separate tax outside the return. It is sales tax, and it becomes input tax.
• Assuming “manufacturer” is enough for exemption. The exclusion covers raw materials and intermediary goods for in-house consumption, and machinery for in-house use. Goods resold in the same state now attract the 3% plus default surcharge.
• Relying on expired exclusions. Check the dates written into items (xi) to (xiii).

What to check in the official text

Read section 7A and the full Twelfth Schedule in the official PDF of the Sales Tax Act as amended to 30 June 2026, where the table and its footnotes keep their layout. Check for notifications amending the Schedule under the proviso to section 7A(2), which are outside this corpus.