Does my restaurant have to collect advance tax on weddings and functions it hosts?

A restaurant that hosts weddings, parties or other functions is a collecting agent for income tax on those bills. Section 236CB of the Income Tax Ordinance, 2001 puts the duty on whoever owns, leases, operates or manages the venue, and the rate in the First Schedule is 10% of the total bill. The host who pays it can adjust it against their own income tax.

What does the law say?

Section 236CB(1) says every prescribed person shall collect advance tax, at the rate in Division XI of Part IV of the First Schedule, on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club, community place or any other place used for such purpose. The collection is “subject to such conditions or limitations as may be prescribed”.

Section 236CB(4) defines the two key terms:

• “Function” includes any wedding related event, a seminar, a workshop, a session, an exhibition, a concert, a show, a party or any other gathering held for such purpose.
• “Prescribed person” includes the owner, a lease-holder, an operator or a manager of a marriage hall, marquee, hotel, restaurant, commercial lawn, club, community place or any other place used for such purpose.

Division XI of Part IV of the First Schedule, as amended to 30 June 2026, reads: “The rate of tax to be collected under section 236CB shall be 10%.” That is the rate for tax year 2027 (1 July 2026 to 30 June 2027).

Section 236CB(3) says the advance tax collected under sub-sections (1) and (2) shall be adjustable.

What about food from an outside caterer?

Section 236CB(2) covers it. Where food, service or any other facility is provided by any other person, the prescribed person shall also collect advance tax on the payment for that food, service or facility, at the Division XI rate, from the person arranging or holding the function. A restaurant that rents out its hall while the family brings in a separate caterer is still the one collecting the tax on the caterer’s bill.

Worked example (illustrative figures)

A family books the banquet hall of a restaurant in Multan for a mehndi. The restaurant’s own bill for hall and food is Rs. 1,200,000. The family also hires a separate decorator whose bill is Rs. 300,000. The amounts are invented; the rates are the ones cited on this page.

Host on the Active Taxpayers’ List:

1. Restaurant bill: 1,200,000 x 10 / 100 = Rs. 120,000
2. Outside decorator’s bill: 300,000 x 10 / 100 = Rs. 30,000
3. Total advance tax the restaurant collects: 120,000 + 30,000 = Rs. 150,000

Host not on the Active Taxpayers’ List:

Rule 1 of the Tenth Schedule increases the rate by hundred per cent, so 10% becomes 20%.

1. Restaurant bill: 1,200,000 x 20 / 100 = Rs. 240,000
2. Outside decorator’s bill: 300,000 x 20 / 100 = Rs. 60,000
3. Total advance tax collected: 240,000 + 60,000 = Rs. 300,000

In both cases the amount collected is advance tax that section 236CB(3) makes adjustable for the host.

What if the host was not required to file a return?

Rule 2 of the Tenth Schedule deals with this. Where the person collecting the tax is satisfied that a person not on the active taxpayers’ list was not required to file a return of income, it must, before collecting the tax, send the Commissioner a written electronic notice giving the person’s name, CNIC or NTN and address, the nature and amount of the transaction, and the reason. The Commissioner has thirty days to accept the contention or direct collection under rule 1. If no order is passed within thirty days, the contention is treated as accepted.

What if the gathering is small, like a birthday dinner?

Section 236CB(4)(a) includes “a party or any other gathering”. The section itself does not set a minimum bill, guest count or floor area. Section 236CB(1) makes collection subject to conditions or limitations “as may be prescribed”, and no rules under section 236CB appear in the edition of the Income Tax Rules, 2002 held in this corpus. This page does not assume any threshold.

Common mistakes

• “Only marriage halls collect this tax.” The section names restaurants, hotels, marquees, commercial lawns, clubs, community places and any other place used for such purpose.
• “The caterer’s bill is the caterer’s problem.” Section 236CB(2) makes the venue operator collect on food, service or facilities supplied by any other person.
• “This tax is lost money for the host.” Section 236CB(3) says it is adjustable, so the host can take it into account against their own income tax liability.
• “This is the same as sales tax on the hall.” Sales tax on services is a separate levy under a different law. Provincial sales tax on services is outside this site’s corpus.

What to check in the official text

Read section 236CB and Division XI of Part IV of the First Schedule of the Income Tax Ordinance, 2001 as amended to 30 June 2026, and rules 1 and 2 of the Tenth Schedule. Check whether the Board has prescribed any conditions or limitations under section 236CB(1), since those would sit in rules or notifications not held here.