If my cafe accepts card payments, does that make it a Tier-1 retailer?

A card terminal no longer makes a cafe or bakery a Tier-1 retailer. The limb of section 2(43A) of the Sales Tax Act, 1990 that caught retailers with a bank point of sale for card payments was omitted by the Finance Act, 2026, which came into force on 1 July 2026. What is left is a shorter list of tests that have nothing to do with how customers pay.

What does the law say?

Before the Finance Act, 2026, sub-clause (f) of section 2(43A) made a retailer Tier-1 if it had acquired a point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorised by the State Bank of Pakistan. Section 4 of the Finance Act, 2026 says, in clause (43A), “sub-clauses (f) and (g) shall be omitted”. Section 1 of that Act brings it into force on 1 July 2026 unless otherwise provided. The Sales Tax Act as amended to 30 June 2026 prints both sub-clauses as omitted.

What still makes a cafe Tier-1?

The limbs that remain in section 2(43A) are:

1. (a) a unit of a national or international chain of stores;
2. (b) a retailer in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
3. (c) a cumulative electricity bill above Rs. 1,200,000 in the immediately preceding twelve consecutive months;
4. (d) a wholesaler-cum-retailer with turnover above Rs. 200 million engaged in bulk import and supply of consumer goods;
5. (gb) turnover above Rs. 200 million in the immediately preceding twelve consecutive months, declared or worked back from tax deducted under section 236G or 236H of the Income Tax Ordinance;
6. (h) any person or class of persons prescribed by the Board, who may also exclude persons by notification.

None of these mentions card payments. A cafe that meets any one of them is Tier-1 whether it takes cards or not.

Why does card payment still matter in Islamabad?

Card payment has a separate role under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001. Serial 1(ii) of Table-1 of its Schedule covers services provided by “restaurants including cafes, food (including ice-cream) parlors, coffee house, coffee shops, deras, food huts, eateries, resorts and similar cooked, prepared or ready-to-eat food service outlets etc.” The rate in column (4) is:

How payment is received	Rate under serial 1(ii)
Debit or credit card, mobile wallet or QR scanning	Five per cent, on condition that no input tax adjustment or refund is admissible
Cash	Fifteen per cent

So in Islamabad, a card machine changes the rate on the service, not the Tier-1 status. Section 3(1) of the same Ordinance also has a proviso requiring any service provider in Table-1 or Table-2 to integrate with the Board’s computerized system for real-time reporting, from the date and in the manner the Board prescribes by general order.

Outside Islamabad, sales tax on restaurant services is levied by the provinces under their own laws, which are outside this corpus.

Worked example (illustrative figures)

Two made-up cafes, both taking cards:

Test	Bean There, street cafe in Johar Town, Lahore	Brew Lab, cafe in F-7 Markaz, Islamabad
Chain unit (a)	No, single outlet	No, single outlet
Air-conditioned mall or plaza (b)	No, street-level	No, street-level
Electricity above Rs. 1,200,000 in twelve months (c)	Rs. 720,000	Rs. 960,000
Turnover above Rs. 200 million (gb)	Rs. 22 million	Rs. 30 million
Card machine	Yes, not a Tier-1 test	Yes, not a Tier-1 test
Tier-1?	No, on these facts	No, on these facts

For Brew Lab, the Islamabad rate still depends on payment method. On a bill of Rs. 2,000 before tax:

• Paid by card: 5% x Rs. 2,000 = Rs. 100 sales tax.
• Paid in cash: 15% x Rs. 2,000 = Rs. 300 sales tax.

The difference on this one bill is Rs. 300 minus Rs. 100 = Rs. 200.

What if my cafe was registered as Tier-1 only because of the card machine?

The Sales Tax Act as amended to 30 June 2026 contains no transitional rule for retailers who were Tier-1 only under old sub-clause (f). It does not say whether an existing registration or integration ends automatically. The law is silent on this, and this page does not fill the gap.

Common mistakes

• Relying on guidance from before July 2026. Many summaries still list the card test.
• Removing the card machine to avoid Tier-1. Since the card limb is gone, removing a terminal does not change Tier-1 status under section 2(43A). In Islamabad it would move card customers to cash, where the Schedule rate is fifteen per cent rather than five.
• Assuming a mall cafe escapes because it is small. Limb (b) applies to any retailer in an air-conditioned mall, plaza or centre, excluding kiosks.

What to check in the official text

Compare clause (43A) of section 2 of the Sales Tax Act as amended to 30 June 2026 with section 4 of the Finance Act, 2026. For Islamabad, read serial 1 of Table-1 of the Schedule to the ICT (Tax on Services) Ordinance as amended to 30 June 2025, and any Board general order fixing the date for integration under section 3(1). Board notifications under limb (h) are not held in this corpus.