Sales Tax Calculation, Input, Output Tax and Section 8B
21 October 2025By Abdullah Safeer (LLB, DTL)
Sales Tax Payable = Output Tax − Input Tax. Simple in theory, but Section 8B caps how much input you can adjust in one period.
Output tax is what you charge customers, sell Rs. 100 at 18% and you collect Rs. 18 that belongs to FBR.
Input tax is what you paid suppliers on your business purchases, your legal right to adjust against output, so you don't pay twice on the same value.
The basic formula is beautifully simple, Sales Tax Payable = Output Tax − Input Tax. Collect Rs. 18, paid Rs. 15, deposit Rs. 3.
Section 8B of the Sales Tax Act 1990 changed this: admissible input adjustment in any one period cannot exceed 90% of output tax, at least 10% of output tax must always be paid in cash regardless of input available.
If output is Rs. 100 and input is Rs. 95, you can only adjust Rs. 90 and must pay Rs. 10 cash, the remaining Rs. 5 is carried forward. This catches many businesses off guard and triggers FBR demands plus late payment penalties.
Keywords
Sales tax calculation Pakistan, input output tax, section 8B, admissible input adjustment
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