Sales tax and withholding tax are two of the most prevalent taxes in Pakistan. Both apply to individuals and companies, but for different reasons. Sales tax applies to services and goods. Withholding tax is deducted from the source of income. Understanding the distinction can enable you to better manage money and prevent legal problems.

This book describes how both taxes operate, who pays them, and how law firms and civil litigation attorneys can assist if there is a problem.

What Is Sales Tax?

Sales tax is an amount added to the cost of goods and services. It is paid by the consumer and collected by the business, which then pays it to the state.

Common Features of Sales Tax

• Applied to goods and services
• Paid for by consumers
• Collected by companies
• Filed with the Federal Board of Revenue (FBR) or provincial authorities

Example

When you purchase a laptop costing PKR 100,000 and the rate of sales tax is 18 percent, you pay additional PKR 18,000. The price becomes PKR 118,000. The seller remits PKR 18,000 to the FBR.

What Is Withholding Tax?

Withholding tax is an amount of tax that is deductable at the source of the income. The one paying or the organization making the payment deducts the tax and remits it to the government on your behalf.

Common Features of Withholding Tax

• Deducted from wages, contracts, rentals, dividends, etc.
• Collected at the source
• Remitted by the payer, not the recipient

Example

If a company pays a contractor PKR 50,000, and the withholding tax rate is 10 percent, they withhold PKR 5,000. The contractor gets PKR 45,000. The company pays PKR 5,000 to the government.

Key Differences Between Sales Tax and Withholding Tax

Feature	Sales Tax	Withholding Tax
Purpose	Tax on consumption	Tax on income
Paid By	End consumer	Income receiver
Collected By	Seller	Employer or payer
Frequency	Per transaction	Periodic (monthly, annually)
Regulated By	FBR or provincial tax boards	FBR

How Law Firms Help With Tax Disputes

If a tax issue arises, a law firm in Karachi or any other city can help resolve it. Civil litigation lawyers and attorneys are trained to handle tax-related matters.

Services Offered by Tax Law Firms

• Filing appeals for overpaid taxes
• Representing clients in court
• Negotiating with tax authorities
• Reviewing contracts to avoid future tax issues

Whether it is a sales tax audit or a withholding tax dispute, legal support makes the process smoother.

When to Hire a Lawyer

You need to speak to a civil litigation lawyer if:

• Your company is subject to a tax audit
• You are issued a notice for sales or withholding tax unpaid
• You think too much tax has been withheld
• You need to prepare contracts with tax provisions

Taxation and civil litigation specialists are the best lawyers to advise individuals and businesses alike.

Filing Sales Tax in Pakistan: A Quick Guide

Follow these steps to file your sales tax:

• Register at the FBR with your National Tax Number (NTN)
• Charge sales tax from customers on sales
• Maintain records of all transactions
• File your monthly sales tax return on the FBR portal
• Pay before the due date
• Non-compliance can lead to penalties, audit, or court action.

Filing Withholding Tax in Pakistan: The A-to-Z Guide

• Determine whether the payment type is subject to withholding
• Deduct the proper amount according to FBR regulations
• Deposit the amount in the government exchequer
• Submit a monthly report on the FBR website
• Issue a withholding tax certificate to recipient

Enterprises should exercise special caution so that they do not over-deduct or omit payment. Both have serious legal consequences.

FAQs

What is the prime distinction between sales tax and withholding tax?

Sales tax is paid by the consumer on goods and services. Withholding tax is deducted from the source of income.

Who collects these taxes?

Businessmen collect sales tax. Employers or payers collect withholding tax and remit it to the government.

Can I get a refund on overpaid withholding tax?

Yes. You can apply for refund through FBR portal. A lawyer may assist you with this process.

Does withholding tax and sales tax apply to freelancers?

Freelancers can be subject to withholding tax when clients withhold it from them. Sales tax can be imposed if they are selling services based on the province.

How is a law firm useful in tax compliance?

Lawyers will study your tax returns, settle disputes, and defend you in court if necessary. Lawyers also assist you in comprehending your obligations legally.

Conclusion

Comprehending the distinction between withholding tax and sales tax keeps you in line and out of trouble. Both play an essential part in the economy of Pakistan but are differently applied.

If you are unclear about your responsibilities, you should consult a tax attorney or a reputable law firm. Early advice can prevent you from losing money and anxiety.

Struggling with tax issues? Reach out to a civil lawsuit attorney or law firm in Karachi today for expert advice.