What sales tax does a bakery or sweet shop charge on cakes and mithai?

Cakes and mithai have no rate of their own in the Sales Tax Act, 1990. How much federal sales tax a shop deals with depends first on whether the shop is a Tier-1 retailer, and only then on the goods.

What does the law say?

Three provisions decide the answer:

1. Section 3(9A). Tier-1 retailers “shall pay sales tax at the rate as applicable to the goods sold under relevant provisions of this Act or a notification issued there under”.
2. Section 3(1). The general rate is eighteen per cent of the value of a taxable supply.
3. Section 3(9). Retailers other than Tier-1 are charged “through their monthly electricity bills”, at 5% where the monthly bill does not exceed Rs. 20,000 and 7.5% where it does.

Section 13 exempts only goods specified in the Sixth Schedule. The local-supply table of that Schedule (Table-2) exempts “All types of breads, nans and chapattis” at serial 54 and “Prepared food or foodstuff supplied by Restaurants and caterers” at serial 53. No entry in the Sixth Schedule names cakes, pastries, mithai or sweetmeats, whether loose or packed.

How does it work in practice?

Is the shop Tier-1? Clause (43A) of section 2 lists the categories. A shop meeting any one is Tier-1: for example a unit of a national or international chain, a shop in an air-conditioned mall or plaza (not a kiosk), or one whose electricity bills over the preceding twelve consecutive months exceed Rs. 1,200,000.

If Tier-1: the shop charges the rate for the goods. For cakes and loose mithai, no reduced rate or exemption was found in the schedules, so the general 18% applies on the value excluding tax.

If not Tier-1: the shop’s federal sales tax is collected through its commercial electricity bill under section 3(9). The Act does not ask it to add a percentage to each box of mithai.

Packaged goods on the shelf. The Third Schedule lists goods taxed on printed retail price, including “Biscuits in retail packing with brand name” (serial 47) and “Sugar confectionery, sold in retail packing” (serial 57, added by the Finance Act, 2026). Under section 3(2)(a), tax on these is charged at 18% of the retail price, which the manufacturer or importer must print on the pack.

Related items. Serial 87 of Table-1 of the Eighth Schedule gives 10% on local supply of vermicelli, sheer mal, bun and rusk, but excludes those sold in bakeries and sweet shops that are Tier-1.

Worked example (illustrative figures)

Tier-1: Shahi Sweets, a branch of a chain in Rawalpindi. One day’s counter sales, excluding tax:

Item	Value	Sales tax at 18%
Mithai, 20 kg at Rs. 1,500 per kg	Rs. 30,000	Rs. 5,400
Cakes, 10 at Rs. 2,500	Rs. 25,000	Rs. 4,500
Total	Rs. 55,000	Rs. 9,900

Check: Rs. 55,000 x 18% = Rs. 9,900. Customers pay Rs. 64,900 in total.

If the shop prices tax-inclusive at Rs. 1,770 per kg of mithai, the value is Rs. 1,770 / 1.18 = Rs. 1,500 and the tax is Rs. 270.

Not Tier-1: Madina Sweets, a street shop in Multan.

1. Monthly commercial electricity bill: Rs. 18,000. This does not exceed Rs. 20,000, so the rate is 5%.
2. Rs. 18,000 x 5% = Rs. 900 collected with the bill.
3. If the bill were Rs. 30,000, the rate would be 7.5%: Rs. 30,000 x 7.5% = Rs. 2,250.

Section 3(9) states the rate by reference to “the monthly bill amount” but does not spell out the base in so many words. The arithmetic above applies the rate to the bill amount, which is how the wording reads.

What if …?

What if my bakery also serves customers at tables? Serial 53 of Table-2 of the Sixth Schedule exempts prepared food supplied by restaurants and caterers. The Act does not define “restaurant” or say whether a bakery cafe is one. This page does not resolve that.

What if I sell bread and cakes together? Bread falls under serial 54 of Table-2 and is exempt. Cakes have no exemption. A Tier-1 shop selling both is dealing in taxable and exempt goods, which affects how much input tax it can claim.

What if I bake to order for weddings? The rate rules above are about goods. Any provincial tax on catering or services is levied under provincial laws that are outside this corpus.

Common mistakes

• Assuming mithai is a food staple and so exempt. The Sixth Schedule exempts named items, and mithai is not one of them.
• Adding 18% at a non-Tier-1 shop. Section 3(9) collects tax from non-Tier-1 retailers through the electricity bill.
• Using the 10% rusk rate for cakes. Serial 87 covers only vermicelli, sheer mal, bun and rusk, and excludes Tier-1 bakeries and sweet shops even for those.

What to check in the official text

Read section 3(1), 3(2)(a), 3(9) and 3(9A), section 13 and clause (43A) of section 2 of the Sales Tax Act as amended to 30 June 2026. In the official PDF, check serials 53 and 54 of Table-2 of the Sixth Schedule, serials 47 and 57 of the Third Schedule and serial 87 of Table-1 of the Eighth Schedule. Notifications under section 3(2)(b) or 3(6) could change a rate for particular goods. They are not in this corpus.