The Third Schedule of Sales Tax in Pakistan is a key part of the Sales Tax Act that deals with how sales tax is charged on certain goods. Under this schedule, sales tax is applied on the retail price of specific products instead of the value at which they are sold by the manufacturer.
This means the tax is calculated based on the price printed on the packaging, not on the price during wholesale or distribution. The purpose is to ensure transparency, prevent under-invoicing, and maintain fair tax collection.
What is the Purpose of the Third Schedule of Sales Tax?
The main aim of the Third Schedule is to stop businesses from avoiding tax by selling products at lower declared prices. By requiring tax to be charged on the printed retail price, the government ensures that tax collection remains stable and fair. This method is especially applied to fast-moving consumer goods (FMCGs) like food items, cosmetic products, and household items that are sold in large quantities.
How It Works
Products listed under the Third Schedule must have:
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A clearly printed Retail Price (RP) on the packaging
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Sales tax calculated on that Retail Price
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Sales tax paid at the manufacturing or import stage
For example, if a product’s retail price is Rs. 500 and the sales tax rate is 18%, then sales tax will be Rs. 90. This tax is paid before the product even reaches the market.
Products Commonly Covered
The Third Schedule usually covers:
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Packaged food items (snacks, biscuits, juices, etc.)
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Personal care products (shampoo, toothpaste, soap, etc.)
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Household cleaning products
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Imported branded items with a fixed retail label
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Certain electronic goods
The list is updated when the government revises tax policies, so businesses must stay aware of current notifications.
Impact on Businesses
For manufacturers and importers, compliance with the Third Schedule is compulsory. They must:
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Print the retail price on packaging
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Pay sales tax based on printed price
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Maintain proper documentation
Retailers usually do not calculate or pay sales tax separately on these products because the tax is already included in the printed retail price.
Impact on Consumers
Consumers pay the sales tax as part of the retail price. This makes pricing clear and reduces the chance of retailers overcharging or underbilling.
Why the Third Schedule is Important
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Ensures uniform prices across markets
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Prevents tax evasion
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Keeps the system transparent
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Helps the government collect steady revenue
FAQs About Third Schedule of Sales Tax
1. What is the Third Schedule of Sales Tax?
It is the part of the law where sales tax is charged on the printed retail price of selected goods instead of wholesale price.
2. Do retailers need to add sales tax on Third Schedule products?
No, the tax is already included in the printed price by the manufacturer or importer.
3. Why is retail price printed on Third Schedule items?
To maintain transparency and prevent tax evasion.
4. Does the Third Schedule list change?
Yes, the government may update it through budget announcements or tax notices.
