With the rapid expansion of digitally ordered goods in Pakistan’s commercial landscape, tax compliance obligations under the Sales Tax Act, 1990 have taken on increased significance, particularly for entities classified as withholding agents. The Eleventh Schedule of the statute outlines specific provisions governing the withholding of sales tax on digitally ordered goods, making it essential for businesses to understand the correct procedure for generating and depositing the Sales Tax Withholding Challan.
The first step in the process involves determining applicability. Businesses must confirm that the transaction in question qualifies as digitally ordered goods under the definitions provided in the Eleventh Schedule of the Sales Tax Act, 1990. This includes assessing whether the supply meets the criteria outlined in the law and whether the entity involved is designated as a withholding agent. Only once both conditions are satisfied should the withholding process proceed.
After confirming applicability, the next step is to calculate the withholding amount. The prescribed sales tax withholding rate must be applied to the gross value of the taxable supply, in accordance with the relevant provisions of the Act and any associated rules or notifications. Accuracy at this stage is critical, as miscalculation may result in underpayment or excess deduction, both of which can trigger compliance issues or reconciliation challenges.
Once the withholding amount has been determined, the withholding agent must generate a Payment Slip ID (PSID) through the Federal Board of Revenue’s e-Payments system. Access to the e-Payments portal allows users to initiate the challan creation process digitally. Within the portal, the relevant tax type must be selected, specifically the category designated for Sales Tax Withheld.
During this stage, the user must enter the appropriate section code corresponding to withholding under the Eleventh Schedule. Correct selection of the section code ensures that the deposited amount is properly categorized within the tax system. The withholding agent must also input the relevant tax period and the calculated amount before proceeding further.
After verifying all details, the system generates the PSID. This Payment Slip ID serves as a unique reference for the transaction and enables payment through designated channels, including online banking platforms. Once payment is completed, it is advisable to retain confirmation receipts and system-generated acknowledgments as part of internal compliance documentation.
Equally important is the post-payment compliance requirement. The withheld sales tax amount must be accurately reflected in the relevant Sales Tax Return for the applicable tax period. Proper disclosure ensures alignment between withholding records and return filings, reducing the likelihood of audit discrepancies. Maintaining comprehensive documentation, including invoices, withholding calculations, and payment confirmations, is essential to demonstrate adherence to statutory obligations.
Timely deduction and deposit of sales tax withholding under the Eleventh Schedule safeguards businesses against penalties, default surcharges, and potential enforcement actions. As digital commerce continues to expand, structured compliance processes are becoming increasingly important for organizations operating in the digitally ordered goods segment. By following a systematic approach to challan generation and tax deposit, withholding agents can meet regulatory requirements efficiently while minimizing operational risk.
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