When do I have to charge 4% further tax on a sale to an unregistered buyer or one not on the active taxpayers list, and is it still in force?

A wholesaler in Pakistan often sells to two kinds of shop at once: registered traders who can claim input tax, and small unregistered shops that cannot. The Sales Tax Act, 1990 treats the second kind of sale differently. On top of the normal sales tax, the supplier charges a further tax, and the text of the Act as amended to 30 June 2026 keeps that charge at four percent.

What does the law say?

Section 3(1A) reads, in the words of the Act, “where taxable supplies are made to a person who has not obtained registration number or he is not an active taxpayer, there shall be charged, levied and paid a further tax at the rate of four percent of the value”. It is “in addition to” the rates in sub-sections (1), (1B), (2), (5) and (6) of section 3 and section 4.

Three limits are built into the same sub-section:

Limit	What the text says
Section 8(6)	Section 3(1A) is “subject to” section 8(6), under which the Board can specify goods that a registered person cannot supply to an unregistered person at all
Federal Government notification	The Federal Government “may, by notification in the official Gazette, specify the taxable supplies in respect of which the further tax shall not be charged”
Taxable supplies only	Further tax attaches to taxable supplies, and clause (41) of section 2 excludes exempt supplies from that term

The footnotes to the consolidated Act show the history: section 3(1A) was inserted by the Finance Act, 2013, the words “or he is not an active taxpayer” were added by the Finance Act, 2022, and “four” replaced “three” through the Finance Act, 2023.

Who counts as not an active taxpayer?

Clause (1A) of section 2 defines an active taxpayer as a registered person who does not fall in any of these categories:

1. blacklisted, or registration suspended, under section 21;
2. fails to file the sales tax return under section 26 by the due date for two consecutive tax periods;
3. fails to file an income tax return under section 114 or a statement under section 115 of the Income Tax Ordinance, 2001 by the due date;
4. fails to file a quarterly or annual withholding statement under section 165 of that Ordinance.

Section 21A lets the Board maintain an active taxpayers list in the manner prescribed by rules. Rule 12A(1) of the Sales Tax Rules, 2006 says a registered person who does not fulfil the conditions “shall automatically become a non-active taxpayer” and be removed from that list. Rule 12A(2) then bars a non-active taxpayer from issuing sales tax invoices and from claiming input tax or refund.

One drafting point: rule 12A(1), in the Rules as amended to 30 June 2025, refers to “clause (1) of section 2”. The Finance Act, 2025 renumbered the definition of active taxpayer as clause (1A). The Rules text in this corpus has not caught up with that renumbering.

How does it work in practice?

For each sale, the supplier checks two things about the buyer: is there a registration number, and is the buyer on the active taxpayers list? If the answer to either is no, and the goods are taxable and not excluded by notification, section 3(1A) adds four percent of the value.

The supplier collects it and pays it with its return for the tax period. Whether input tax can be set against it is a separate question, covered on the related page about further tax and input tax.

Worked example (illustrative figures)

Bilal Traders, a registered distributor in Multan, supplies the same goods in one day to two shops. Assume the goods are charged at the standard rate of eighteen per cent under section 3(1), are not listed in the Third Schedule and are not covered by any exclusion notification. The amounts are invented.

Step	Shop A: registered, active	Shop B: unregistered
Value of supply	Rs. 500,000	Rs. 500,000
Sales tax at 18%	Rs. 90,000	Rs. 90,000
Further tax at 4%	nil	Rs. 20,000
Invoice total	Rs. 590,000	Rs. 610,000

Check: 500,000 x 18% = 90,000; 500,000 x 4% = 20,000; 500,000 + 90,000 + 20,000 = 610,000.

What if the buyer becomes non-active after I invoiced?

The Act ties further tax to the time a taxable supply is made to a person who “is not an active taxpayer”. The Act does not say how a supplier is to treat a buyer whose status changes between order and delivery. Clause (44) of section 2 fixes the time of supply as delivery or payment, whichever is earlier, which is the natural point to check status, but the Act does not state that link in terms.

Common mistakes

• Assuming further tax was abolished. The consolidated Act to 30 June 2026 still contains section 3(1A) at four percent. Any exclusion would come from a Federal Government notification, and none is held in this corpus.
• Charging it to every registered buyer. An active registered buyer is outside section 3(1A).
• Ignoring zero-rated goods. Section 4 opens “Notwithstanding the provisions of section 3 except those of sub-section (1A)”, so zero-rating does not remove further tax.

What to check in the official text

Read section 3(1A), clauses (1A), (41) and (44) of section 2, and sections 4, 8(6) and 21A of the Sales Tax Act as amended to 30 June 2026, and rule 12A of the Sales Tax Rules, 2006. Check any Federal Government notification under section 3(1A) and any Board notification under section 8(6) for your goods, since neither is held in this corpus.