Do I charge further tax if my buyer is registered for sales tax but not on the Active Taxpayers List?

A buyer who shows you a sales tax registration number may still be a buyer on whom further tax is charged. Section 3(1A) of the Sales Tax Act, 1990 was widened in 2022 so that it reaches two kinds of buyer: one with no registration number, and one who “is not an active taxpayer”. The dispute at the counter is usually about the second kind.

What does the law say?

Section 3(1A), as amended to 30 June 2026, says that where taxable supplies are made “to a person who has not obtained registration number or he is not an active taxpayer”, further tax is charged at four percent of the value, in addition to the ordinary rate. The footnote to the sub-section records that the words about an active taxpayer were inserted by the Finance Act, 2022.

The Act defines “active taxpayer” in clause (1A) of section 2. It means a registered person who does not fall in any of these categories:

Clause	Category that makes a registered person not active
(a)	Blacklisted, or registration suspended, under section 21
(b)	Fails to file the sales tax return under section 26 by the due date for two consecutive tax periods
(c)	Fails to file an income tax return under section 114, or a statement under section 115, of the Income Tax Ordinance, 2001 by the due date
(d)	Fails to file a quarterly or annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001

Section 21A gives the Board power to maintain the active taxpayers list in the manner prescribed by rules, and lets those rules impose restrictions on a person who ceases to be an active taxpayer.

How does a registered buyer become non-active?

Rule 12A(1) of the Sales Tax Rules, 2006 says a registered person who does not fulfil the conditions in the definition “shall automatically become a non-active taxpayer” and his name shall be removed from the list. The Rules consolidated to 30 June 2025 still refer to “clause (1) of section 2”; the Act’s footnote shows that the clause was renumbered as (1A) by the Finance Act, 2025.

The Rules also take names off the list in registration cases. Rule 5(4) says a person who does not complete biometric verification at a NADRA e-Sahulat Centre within a month of registration shall be taken off the sales tax Active Taxpayer List. Rule 5(6) does the same where a document uploaded at registration is found non-genuine and is not replaced within fifteen days, subject to approval by the Member (IR-Operations).

So a buyer can hold a genuine registration number and still be off the list, for example because two monthly returns were filed late or the annual income tax return was missed.

What restrictions apply to a non-active taxpayer?

Rule 12A(2) says a non-active taxpayer is not entitled to:

• file Goods Declarations for import or export;
• issue sales tax invoices;
• claim input tax or refund;
• avail any concession under the Act or rules.

Rule 12A(3) adds that no person shall make any purchases from a non-active taxpayer, and rule 12A(4) says no input tax credit is admissible on an invoice from a non-active supplier entered in the buyer’s return.

For the seller, the practical point is the one in section 3(1A): a supply to a non-active buyer attracts the four percent further tax, just as a supply to an unregistered buyer does.

Worked example (illustrative figures)

Naveed Traders, a registered distributor in Peshawar, supplies taxable goods worth Rs. 800,000 (excluding tax) to a registered retailer in September 2026. The retailer filed its July and August 2026 sales tax returns late, so it falls in clause (b) of section 2(1A) and is not an active taxpayer. The figures are invented; the rates are from section 3.

1. Ordinary sales tax at 18%: Rs. 800,000 x 18% = Rs. 144,000.
2. Buyer not active, so further tax at 4%: Rs. 800,000 x 4% = Rs. 32,000.
3. Invoice total: Rs. 800,000 + Rs. 144,000 + Rs. 32,000 = Rs. 976,000.

Under rule 12A(2)(c) the buyer cannot claim input tax while non-active, so the Rs. 176,000 of tax on this invoice is a cost to it for as long as that status lasts.

What if the buyer is restored?

Rule 12B, printed within rule 12A in the consolidated Rules, says a non-active taxpayer may be restored if it files the missing return or statement with any tax due, the RTO or LTO recommends restoration after any audit or investigation it considers necessary, and the Board issues an order. Further tax under section 3(1A) turns on the buyer’s status for the supply in question. The Act does not say how a seller should verify that status on a given date; the online lookup tools are outside this corpus.

What if I am the one who becomes non-active?

The rules then work against you. Rule 12A(2)(b) bars you from issuing sales tax invoices, rule 12A(3) bars others from buying from you, and rule 12A(4) denies your customers input tax on your invoices. Your registered customers therefore have a direct reason to check your status too.

Common mistakes

• Treating a registration number as proof of active status. Section 3(1A) looks at active status as well as registration.
• Thinking only sales tax lapses count. Clause (c) of section 2(1A) makes a missed income tax return or statement enough, and clause (d) covers withholding statements under section 165 of the Ordinance.
• Assuming status is fixed. Rule 12A makes removal automatic, and rule 12B allows restoration by Board order.

What to check in the official text

Read section 3(1A), clause (1A) of section 2 and section 21A of the Sales Tax Act amended to 30 June 2026, and rules 5, 12A and 12B of the Sales Tax Rules, 2006 as amended to 30 June 2025. Check also for any Federal Government notification under the proviso to section 3(1A) excluding particular supplies from further tax; none is held in this corpus.