What happens if a distributor files the monthly sales tax return late or pays the tax late?

A late monthly return and a late payment of sales tax are two separate offences in the Sales Tax Act, 1990, each with its own entry in the section 33 Table. Unpaid tax also attracts default surcharge under section 34. For a distributor, a run of late returns can also cost active taxpayer status.

What does the law say about filing and paying?

Section 26(1) requires every registered person to furnish, not later than the due date, a true, complete and correct return in the prescribed form, “indicating the purchases and the supplies made during a tax period, the tax due and paid and such other information, as may be prescribed”. A tax period is one month unless the Board specifies otherwise.

Section 2(9) defines the due date for a return as the 15th day of the month following the end of the tax period, or another date the Board notifies, and allows different dates for different parts of the return. Rule 18(9) of the Sales Tax Rules, 2006 says that where the due date is prescribed as the 15th, “the tax due shall be deposited by the 15th and the return shall be submitted electronically by 18th of the same month”. Rule 18(1) requires the return to be filed electronically.

What are the penalties?

The section 33 Table, with the figures substituted by the Finance Act, 2026:

S. No.	Offence	Penalty
1	Fails to furnish a return within the due date	Rs. 50,000. If filed within ten days of the due date: Rs. 2,000 for each day of default
5	Fails to deposit tax due, or any part, in the time or manner laid down	Rs. 50,000 or 5% of the tax involved, whichever is higher. If paid within ten days of the due date: Rs. 5,000 for each day of default

Serial 5 carries two more provisos. No penalty is imposed for a miscalculation made for the first time during a year. And if tax is still unpaid sixty days after a notice from an officer not below Assistant Commissioner, the defaulter is further liable, on conviction by a Special Judge, to imprisonment up to three years, a fine up to the tax involved, or both.

What is default surcharge?

Section 34(1) says a registered person who does not pay tax due in time “shall, in addition to the tax due, pay default surcharge”. Section 34(1)(a) sets the rate at twelve percent per annum or KIBOR plus three percent per annum, whichever is higher, on the tax due. Section 34(2)(b) says that for non-payment the period runs from the 16th day of the month following the due date of the tax period to the day before the tax is actually paid. The Explanation says tax due does not include the penalty.

Worked example (illustrative figures)

Siddiqui Distributors in Sialkot owes sales tax of Rs. 400,000 for a month. The name and amounts are invented; the penalty figures and the 12% floor are from sections 33 and 34.

Case A: return and payment each 6 days late.

1. Return penalty (serial 1 proviso): 6 x Rs. 2,000 = Rs. 12,000.
2. Payment penalty (serial 5 proviso): 6 x Rs. 5,000 = Rs. 30,000.
3. Total penalties: Rs. 42,000.
4. Default surcharge at the 12% floor, spread evenly over the year: Rs. 400,000 x 12% x 6 / 365 = Rs. 789 (rounded).

Case B: return and payment each 25 days late.

1. Return penalty (serial 1): Rs. 50,000.
2. Payment penalty (serial 5): 5% of Rs. 400,000 = Rs. 20,000, so the Rs. 50,000 floor applies.
3. Total penalties: Rs. 100,000.
4. Default surcharge at the 12% floor: Rs. 400,000 x 12% x 25 / 365 = Rs. 3,288 (rounded).

If KIBOR plus 3% is above 12% for the period, section 34 uses that higher rate. The Act gives an annual rate but does not spell out a day-count method; the daily proportion above is only for illustration. The day count also depends on which due date applies, which is covered in the last section.

What if I miss two months in a row?

Section 2(1A) excludes from the definition of active taxpayer a registered person who “fails to file the return under section 26 by the due date for two consecutive tax periods”. Active status matters elsewhere in the Act. For example, the Eleventh Schedule sets lower withholding for active taxpayers than for other suppliers.

What if FBR sends a notice to file?

Section 26(2A) lets an officer require a person who has failed to file to furnish the return within fifteen days of the notice, or another period specified or allowed.

Common mistakes

• Using pre-2026 amounts. The Finance Act, 2026 raised both entries.
• Thinking a return filed with nil payment avoids serial 5. Filing and paying are separate offences.
• Treating the per-day rate as open-ended. It applies only within ten days of the due date. After that, the fixed or percentage penalty applies.

What to check in the official text

Read sections 2(9), 26, 26AB and 34 and serials 1 and 5 of the section 33 Table in the Sales Tax Act, 1990 as amended to 30 June 2026, and rule 18 of the Sales Tax Rules, 2006. The Act defines the due date as the 15th unless the Board notifies otherwise, while rule 18(9) sets the 18th for submitting the return. The Table does not say which date it measures a late return from, so confirm the current date for your category of person. Board notifications changing due dates are not held on this site.