If the manufacturer paid sales tax on the printed retail price of Third Schedule goods, does a distributor charge sales tax or further tax again?

Branded consumer goods in Pakistan, from soap and shampoo to biscuits, tea and juices, carry a printed retail price and a printed sales tax amount. That printing is a feature of the Third Schedule to the Sales Tax Act, 1990. FMCG distributors then ask whether their own sale to shops is taxed again, and whether further tax applies on top. The Act gives a clear rule for the rate and the price, and is less explicit about the stages after the manufacturer.

What does the law say?

The charge. Section 3(2)(a) says that, notwithstanding section 3(1), “taxable supplies and import of goods specified in the Third Schedule shall be charged to tax at the rate of eighteen per cent of the retail price”. If the goods are also in the Eighth Schedule, its rates apply instead. The retail price and the amount of sales tax must be “legibly, prominently and indelibly printed or embossed by the manufacturer” (or the importer, for imported goods) on each article, packet, container or label.

The meaning of retail price. Clause (27) of section 2 defines it as the price fixed by the manufacturer, or importer for imported goods, “inclusive of all duties, charges and taxes (other than sales tax)” at which the brand or variety is sold to the general body of consumers. Where more than one price is fixed for the same brand or variety, the highest applies. Provisos let the Board specify zones for the highest retail price and fix retail prices by notification. For imported Third Schedule goods, the retail price cannot be less than 130 percent of the customs value including customs duties and federal excise duty.

Who pays. Section 3(3)(a) puts liability for tax on a supply of goods on “the person making the supply”.

Which goods are in the Third Schedule?

The source text of the Act to 30 June 2026 lists serial numbers 1 to 75, some omitted. Examples of entries in force include fruit juices, ice cream, aerated waters, cigarettes, toilet soap, detergents, shampoo, toothpaste, tea, powder drinks, toilet and tissue paper, branded spices in retail packing, cement in retail packing, household electrical and gas appliances, paints in retail packing, tyres, motorcycles and branded biscuits in retail packing. Serial numbers 56 to 75 were added through the Finance Act, 2026 and cover items such as edible fats and oils, sugar confectionery, pasta, sauces, milk products, footwear, crockery, household utensils and ceramic sanitary products, each as described in its entry. A note at the end says a higher rate notified by the Federal Government continues after inclusion.

Does the distributor charge sales tax again?

The words of section 3(2)(a) apply to “taxable supplies” of Third Schedule goods. They are not limited to the manufacturer’s supply; only the duty to print the price is placed on the manufacturer. A registered distributor reselling those goods is making a taxable supply under clause (41) of section 2. The Act contains no provision that expressly takes a distributor’s later supply of Third Schedule goods outside tax, and none that sets out how the distributor’s invoice should show it.

What the Act does provide is the input tax mechanism. Section 7(1) lets the distributor deduct input tax paid on its purchases from its output tax. If the distributor’s output tax on a carton is worked on the same printed retail price as the manufacturer’s, the two amounts are equal and the net sales tax on that carton is nil.

The Sales Tax Rules point the same way. Rule 18A(d) deals with how the provisional return rule treats invoices for Third Schedule “items” issued to “a distributor, or a wholesaler, or a retailer, by a manufacturer”. That rule only makes sense if those buyers carry such invoices into their own returns as purchases.

Worked example (illustrative figures)

Awan Distributors in Rawalpindi buys 1,000 cartons of branded biscuits in retail packing (serial number 47) from a registered manufacturer. The figures are invented.

1. Printed retail price per carton, excluding sales tax: Rs. 1,000. Printed sales tax at 18%: Rs. 180.
2. Manufacturer’s tax on 1,000 cartons: 1,000 x Rs. 180 = Rs. 180,000. This is Awan’s input tax.
3. Awan resells all 1,000 cartons to registered, active shops. Output tax at 18% of the retail price: 1,000 x Rs. 180 = Rs. 180,000.
4. Net sales tax: Rs. 180,000 minus Rs. 180,000 = nil, before any limit on input tax.

What about further tax?

Section 3(1A) adds further tax at four percent “in addition to” the rates in sub-sections (1), (1B), (2), (5), (6) and section 4. Sub-section (2) is on that list, so on the text further tax applies when a distributor supplies Third Schedule goods to an unregistered or non-active buyer. The Act does not exclude later stages from it, but the Federal Government can exclude supplies by notification, and any such notification is outside this corpus.

The Act does not say what “value” means for further tax on Third Schedule goods. Continuing the example, if 400 cartons went to unregistered shops at a selling price of Rs. 850 each excluding tax, four percent could be read as 4% x Rs. 340,000 = Rs. 13,600 on the selling price, or 4% x Rs. 400,000 = Rs. 16,000 on the retail price. This page does not choose between those readings.

Common mistakes

• Treating printed tax as the end of the chain. The Act does not say that; the distributor’s resale is still a taxable supply on the text.
• Taxing the resale on a lower selling price. Section 3(2)(a) charges on the retail price, not the distributor’s trade price.
• Forgetting new entries. Many food, household and personal care goods joined the Schedule through the Finance Act, 2026.

What to check in the official text

Read section 3(1A), (2)(a) and (3)(a), clauses (27) and (41) of section 2, section 7 and the Third Schedule in the Sales Tax Act as amended to 30 June 2026, and rule 18A of the Sales Tax Rules, 2006. Check any Board notification fixing retail prices or zones, and any Federal Government notification under section 3(1A) or section 3(2), since none is held in this corpus.