Questions answered on this page
- What is the PRA sales tax rate on restaurants in 2026?
- Does the PRA tax rate depend on how the customer pays?
- What is the PRA sales tax rate on hotels?
- What is the PRA sales tax rate on marriage halls and catering?
- Which other services moved from 5 percent to 8 percent?
- What does without input tax adjustment mean?
- When did the new PRA rates take effect?
- How should a restaurant set up its billing for two rates?
What is the PRA sales tax rate on restaurants in 2026?
From 1 July 2026 a restaurant in Punjab charges 8 percent when the customer pays by debit card, credit card, mobile wallet or QR scan, and 16 percent when the customer pays any other way, including cash. The rate on digital payments was 5 percent before.
The entry covers restaurants, cafes, food parlours including ice cream parlours, coffee houses, coffee shops, deras, food huts, eateries, resorts and similar outlets serving cooked or ready to eat food. The 8 percent rate is charged without input tax adjustment.
Does the PRA tax rate depend on how the customer pays?
Yes, for restaurants and hotels. A bill paid by card, mobile wallet or QR scan is taxed at 8 percent, and the same bill paid in cash is taxed at 16 percent.
The gap is deliberate. A lower rate on payments that leave a record gives both the customer and the business a reason to prefer them. For your billing it means the rate cannot be fixed per menu item. It has to be chosen when the payment method is known.
What is the PRA sales tax rate on hotels?
Hotels, motels and guest houses charge 8 percent without input tax adjustment when payment is received by card, mobile wallet or QR scan, and 16 percent in other cases.
This replaced an older concession of 5 percent that applied only to a business that was not a company, not a franchise and not part of a chain, with fewer than twenty rooms. The new test looks at the payment method rather than the size of the hotel.
What is the PRA sales tax rate on marriage halls and catering?
Marriage halls and lawns, including pandal and shamiana services, and catering services are taxed at 8 percent without input tax adjustment from 1 July 2026. The rate was 5 percent.
Catering includes the services that come with it, such as floral and other decoration and furnishing of the space. Event management was moved to an entry of its own and is also taxed at 8 percent without input tax adjustment.
Which other services moved from 5 percent to 8 percent?
The Finance Act replaced five with eight for a list of reduced rate services, including travel agents, property dealers, architects and interior designers, gyms and health care services, laundries, warehouses and equipment rental.
| Entry | Service | Rate from 1 July 2026 |
|---|---|---|
| 1 | Hotels, motels and guest houses | 8 percent on digital payments, 16 percent otherwise |
| 2 | Marriage halls and lawns, catering | 8 percent |
| 4 | Restaurants, cafes and similar food outlets | 8 percent on digital payments, 16 percent otherwise |
| 10 | Tour operators and travel agents | 8 percent |
| 12 | Property dealers and realtors | 8 percent |
| 14 | Architects, town planners, landscapers, interior decorators and designers | 8 percent |
| 15 | Rent a car, for services to end consumers | 8 percent |
| 18 | Health care, gym, fitness, indoor sports, amusement and recreation | 8 percent |
| 19 | Laundry and dry cleaners | 8 percent |
| 22 | Accountants, auditors and tax consultants, for accountancy, audit, tax or corporate law work | 8 percent |
| 25 | Warehouses, depots and cold storage | 8 percent |
| 30 | Rental of construction equipment, generators and similar | 8 percent |
| 32 | Apartment house and real estate management, rent collection | 8 percent |
| 36 | Event management | 8 percent |
Every 8 percent rate in this table is without input tax adjustment. Foreign exchange services were also brought into tax at 3 percent without input tax adjustment.
What does without input tax adjustment mean?
It means you charge the reduced rate on your sales but cannot deduct the sales tax you paid on your own purchases. The reduced rate is the whole arrangement: a lower rate in exchange for giving up the deduction.
A business with heavy taxed purchases should work out whether the reduced rate actually leaves it better off, because the tax paid on those purchases becomes a cost.
When did the new PRA rates take effect?
On 1 July 2026. The Punjab Finance Act 2026 was passed by the Provincial Assembly on 27 June 2026, received the Governor's assent on 1 July 2026, and states that it comes into force on and from the first day of July 2026.
Any invoice dated on or after that day should carry the new rate. If your point of sale still charges 5 percent, it has been under charging since July, and the shortfall is likely to fall on the business rather than the customer.
How should a restaurant set up its billing for two rates?
Set up both rates in the point of sale and have the rate picked by the payment method at the moment of billing, so that a card payment produces an 8 percent invoice and a cash payment a 16 percent invoice.
- Record the payment method on every invoice, since it is what justifies the rate.
- Decide how a bill split between cash and card is handled before it happens at the counter.
- Send every invoice through eIMS whichever rate applies. The reduced rate does not change the duty to report.
Our guide to PRA penalties covers what a missing invoice now costs.
Sources
- Punjab Finance Act 2026, Act L of 2026, Punjab Gazette of 1 July 2026
- KPMG, A Brief of Provincial Tax Laws 2026
Rates are taken from the Punjab Finance Act 2026 as gazetted. How a particular service is classified decides which entry applies to it, and that is a question for PRA or your adviser. General information, not tax advice.