FED (Federal Excise Duty)

In accordance with the FED Act, all goods and services are subject to FED at a general rate of
15%, with the exception of those listed in the first schedule, for which FED shall be charged at
specific rates as listed in the first schedule. However, section 16 states that all goods and services
are exempt, with the exception of those listed in the first schedule. This means that FED is
applicable only to the goods and services listed in the first schedule, whereas sales tax is charged
on all goods unless specifically exempt.
1ST Schedule
 Hoardings, pole signs, cable TV networks, and sign boards are among the excisable
services listed in First Schedule Table II along with their charges.
 Advertisements in newspapers and magazines are exempt under the third schedule, as are
flights inside or outside of Pakistan, charter flights, and inland freight transportation.
2nd Schedule
A list of excisable services under the 16% sales tax method is listed in the 2nd Schedule [SO 550
dated 5.6.2006] as follows:
 Telecommunication services (if a mobile phone call lasts longer than five minutes, an
additional FED of Rs. 075 per call is required).
 Commercials on cable television and closed-circuit television
 Advertising on hoardings, sign boards, and poles
 Shipping brokers
 Services offered by financial institutions, including banking and non-banking
3rd Schedule
List of excisable items from the first schedule that are conditionally exempt in 3rd Schedule
includes items like:
 Supplying Pakistan Navy with Cigarette for consumption
 Cigarettes provided for the President of Pakistan, provincial governors, their families, and
visitors to consume
 Products used in the Export Processing Zones to manufacture further products
 Internal consumption of manufactured goods for the purpose of producing any
commodities that are FED-eligible.
2. FED Charge
FED is assessed at the rates listed in the First Schedule on the following:
 Goods made in Pakistan;
 Goods imported into Pakistan.
3. Basic Charge
Depending on the category of commodities, the basic charge FED on the goods shall be assessed
on any of the following bases:
 Ad valorem, such as 50% ad valorem concentrates
 Retail Price [for instance, cigarettes at 65% of the retail price; fixed tax on cigarettes
made in-country]
 Quantity (Ton, Kilogram, Litre, or weight
4. Value" for charge purposes
Value for FED purposes shall be established in accordance with the Sales Tax Act, 1990,
excluding the amount of FED payable thereon.
An item's import value, exclusive of all duties and taxes, is Rs. 10,000. Sales tax is 20%, FED is
15%, 5% customs charge, and 5.5% income tax on the importation stage.

1. 10,000 plus 500 customs duty at 5% equals 10,500

2. 10,500 with 1.575 FED at 15% equals 12,075
3. 12,075 plus 2,415 sales tax at 20% equals 14,490
4. 14,490 plus 797 income tax at 5.5%.
5. When to pay
Section 4 read with Section 2(9a) FED must be paid at the following times: For imports, when
the customs duty is paid and for dutiable supplies or services within a month when the monthly
return is filed. The filing deadline for monthly excise returns is 15 days after the end of the
month or another specified date.
6. FED's zero rate and disadvantages
On some items that the Federal government has designated for export out of Pakistan, a zero-rate
of tariff is permitted. The FBR may permit the drawback of duty paid on products used in the
production of commodities by notification and subject to the conditions and rates that may be
prescribed.
8. Adjustment allocation
If a registered person manufactures and sells both excisable and non-excisable goods made from
inputs that have been duty-paid, he or she is only eligible for a duty adjustment on the excisable
items.
9. Application of Sales Tax.
According to Section 7, the regulations of the Sales Tax Act of 1990 will apply to services
provided in the VAT mode specified by SO 550 of 2006.
This means that the registered person has the right to offset any FED owed by it under the FED
Act with input tax that was paid under the Sales Tax Act in relation to services provided under
the VAT mode.
10. Default surcharge
Failure to pay FED, making an erroneous refund claim, making an adjustment, or taking a duty
drawback are all subject to a 12% annual default surcharge. The day after the day the duty is due
until the day before the day the duty is paid is used to calculate the default surcharge.
11. Recovering unpaid duty, incorrectly returned duty
 Within five years of the pertinent date, a show cause notice must be sent for the payment
of any short levied or paid FED, no levy/paid FED, or inaccurate refund.
 The Officer of Inland Revenue may establish the amount of duty payable after taking into
account the justifications, if any, in answer to the show cause notice, and the person in
default shall pay the amount so determined along with the default surcharge and penalty.
12. Recoverable short-paid amounts
When a registered person pays less duty than what is indicated in his return, the shortfall in duty
paid and the default surcharge must be recovered from that person without giving them a show-
cause notice by stopping the removal of any goods from their business premises.
13. Invoices
When clearing or selling goods, including those subject to FED @ 0%, or rendering services, a
person registered under this Act shall submit a serially numbered invoice for each transaction
containing the information listed below:
 The buyer and seller's names, addresses, and NTNs
 The invoice's issue date
 A description of the products and their amount, or, as applicable, a description of the
services
 Value not including FED
 FED amount; and value with FED included
18. FED debit or credit note
The sales tax debit and credit note requirements are the same as Rule 14A of the Federal Excise
requirements from 2005.
19. Special Procedure for Banking Companies, Financial Institutions
The FED rate is 16% in the sales tax mode.
Customers include government organizations, other banks, institutions, and international
businesses in addition to the general people.
Services exempt from FED:
 Hajj
 Umrah,
 Checkbooks,
 Collection of utility bills.