What is further tax, and is the extra 4% on sales to unregistered buyers still charged in 2026-27?

Further tax is the extra sales tax a registered supplier charges when the buyer of taxable goods is not registered, or is registered but not an active taxpayer. For a wholesaler supplying small shops, most of which are unregistered, it is often the largest line on the invoice after the ordinary sales tax. The question in 2026-27 is whether it still applies, and the text of the Act answers that.

What does the law say?

Section 3(1A) of the Sales Tax Act, 1990, as amended to 30 June 2026, says that where taxable supplies are made to a person who has not obtained a registration number, or who is not an active taxpayer, “there shall be charged, levied and paid a further tax” at the rate of four percent of the value, in addition to the rates in sub-sections (1), (1B), (2), (5) and (6) of section 3 and section 4.

Three parts of the sub-section matter most:

Part of section 3(1A)	What it does
Rate	Four percent of the value. The footnote records that “four” replaced “three” through the Finance Act, 2023
Opening words	The sub-section is “subject to” section 8(6) and any notification issued under it
Proviso	The Federal Government may, by notification in the official Gazette, specify taxable supplies on which further tax shall not be charged

The ordinary rate in section 3(1) is eighteen percent of the value of taxable supplies. Further tax is charged on top of that.

Is it still charged in 2026-27?

The consolidated Act amended to 30 June 2026 still contains sub-section (1A) with the rate of four percent. It covers the period from 1 July 2026 unless the law is changed later. If you have read that further tax was abolished, the Act as consolidated to 30 June 2026 does not show that change.

What the Act does allow is exclusion by notification. The proviso lets the Federal Government name taxable supplies on which further tax is not charged. Those notifications are not in this corpus, so this page cannot say which supplies, if any, are currently excluded.

How does it work in practice?

Who charges it. The supplier, a registered person, charges further tax on the invoice, because section 3(3)(a) puts the liability to pay the tax on the person making the supply.

No input tax set-off. Section 7(1) lets a registered person deduct input tax from output tax “excluding the amount of further tax under sub-section (1A) of section 3”. Input tax can reduce the ordinary sales tax, but not the further tax. The full four percent is paid over.

The buyer cannot reclaim it. Section 8(3) says no person other than a registered person shall make any deduction or reclaim input tax. An unregistered shopkeeper therefore carries both the ordinary sales tax and the further tax as part of the cost of the goods.

Goods that cannot be sold to unregistered persons at all. Section 8(6) lets the Board, with the approval of the Federal Minister-in-charge, notify goods which a registered person cannot supply to any person who is not registered. Section 3(1A) is expressly subject to that power. Notifications under section 8(6) are not held in this corpus.

Worked example (illustrative figures)

Bilal Distributors in Multan, a registered distributor, supplies taxable goods worth Rs. 500,000 (value excluding tax) to an unregistered general store in August 2026. The amounts are invented; the rates are from section 3.

1. Ordinary sales tax at 18%: Rs. 500,000 x 18% = Rs. 90,000.
2. Further tax at 4%: Rs. 500,000 x 4% = Rs. 20,000.
3. Invoice total: Rs. 500,000 + Rs. 90,000 + Rs. 20,000 = Rs. 610,000.

Suppose this is Bilal’s only sale for the month and the input tax on the goods sold is Rs. 70,000.

4. Output tax excluding further tax: Rs. 90,000. Less input tax Rs. 70,000 = Rs. 20,000.
5. Add further tax, which input tax cannot reduce: Rs. 20,000.
6. Total payable for the month: Rs. 20,000 + Rs. 20,000 = Rs. 40,000.

If the same goods went to a registered, active buyer, step 2 would not arise and the invoice would total Rs. 590,000.

What if the goods are charged on retail price?

Section 3(2)(a) charges Third Schedule goods on the retail price printed on the pack. Section 3(1A) says further tax is “four percent of the value” in addition to the rate in sub-section (2). The sub-section does not spell out a separate base for Third Schedule goods, and this page does not resolve that point. Check the text and any notification before applying it.

Common mistakes

• Treating further tax as abolished. The Act amended to 30 June 2026 still levies it at four percent. Only a notification under the proviso takes a supply outside it.
• Netting it against input tax. Section 7(1) excludes further tax from the input-output deduction.
• Charging it only to unregistered buyers. Since the Finance Act, 2022 the sub-section also covers a buyer who “is not an active taxpayer”. See the related page on registered buyers who are not on the Active Taxpayers List.

What to check in the official text

Read section 3(1A) with sections 7(1), 8(3) and 8(6) of the Sales Tax Act amended to 30 June 2026. Before charging or not charging further tax on a particular product, check for a Federal Government notification under the proviso to section 3(1A) and for any Board notification under section 8(6). Neither kind of notification is held in this corpus.