What is the penalty if a Tier-1 retailer does not integrate its POS with FBR?

What does the law say?

The penalty sits in the table under section 33 of the Sales Tax Act, 1990, at serial 25A. It covers a person required to integrate his business under section 23 (or the related monitoring provision) who fails to register under the Act, or, if registered, fails to integrate as the law and rules require, or fails to issue electronic invoices after integration.

The duty itself is in the proviso to section 23(6): from the date and in the manner the Board prescribes, “all Tier-1 retailers shall integrate their retail outlets with Board’s computerized system for real-time reporting of sales.”

Serial 25A sets four penalties in a fixed ladder:

Default	Penalty	When it can be imposed
First	Rs. 500,000	On the first default
Second	Rs. 1,000,000	After fifteen days of the order for the first default
Third	Rs. 2,000,000	After fifteen days of the order for the second default
Fourth	Rs. 3,000,000	After fifteen days of the order for the third default

On top of the money penalties, serial 25A says the business premises “shall be liable to be sealed” by an officer of Inland Revenue in the manner prescribed.

Is there a way to avoid the first penalty?

Yes. The proviso to serial 25A says that if the retailer integrates its business with the Board’s computerized system before the penalty for the second default is imposed, the Commissioner shall waive the penalty for the first default. The word used is “shall”, so the waiver is not left to discretion once the condition is met.

The waiver covers only the first penalty. Once the second penalty order is passed, the proviso no longer helps with either amount.

What does serial 25 add?

Serial 25 of the same table, substituted by the Finance Act, 2026, covers any person required to integrate for monitoring, tracking, reporting or recording of sales who fails to register or fails to integrate “within the stipulated time as notified by the Board”. It provides:

• a penalty of up to Rs. 1 million;
• if the offence continues after one month of the first penalty, a second penalty of up to Rs. 5 million;
• sealing of the business premises, with or without a penalty.

Serial 25 gives maximums (“up to”), while serial 25A gives fixed amounts. The Act does not say which entry is applied to a Tier-1 retailer when both could fit. Rules 150ZEP and 150ZER of the Sales Tax Rules, 2006 refer to serial 25A for non-integrated Tier-1 retailers.

How does it work in practice?

The rules on sealing non-integrated Tier-1 retailers are in Chapter XIV-AD of the Sales Tax Rules, 2006. An officer not below Assistant Commissioner reports the non-integration to the Commissioner, who forwards it to the Chief Commissioner for a written order allowing or disallowing sealing.

Rule 150ZER then sets the exit. The Commissioner imposes the serial 25A penalty by order, and the premises “shall remain sealed till the payment of penalty and integration of all POS machines installed in all its branches or outlets”. Integration is carried out in front of an FBR team that includes a technical person.

A separate cost runs alongside the penalties. Under section 8B(6), if a Tier-1 retailer does not integrate an outlet during a tax period or part of it, adjustable input tax for that whole period is reduced by 60%.

Worked example (illustrative figures)

Rashid runs a Tier-1 clothing store in Faisalabad with two outlets and has not integrated either. The dates are invented; the penalty amounts are those in serial 25A.

Scenario A: he does not integrate.

Step	Order date (illustrative)	Penalty
First default	1 August	Rs. 500,000
Second default	20 August (more than fifteen days after the first order)	Rs. 1,000,000
Third default	10 September	Rs. 2,000,000
Fourth default	1 October	Rs. 3,000,000
Total		Rs. 6,500,000

Check: Rs. 500,000 + Rs. 1,000,000 = Rs. 1,500,000; + Rs. 2,000,000 = Rs. 3,500,000; + Rs. 3,000,000 = Rs. 6,500,000. This is before any input tax reduction under section 8B(6) and any sealing.

Scenario B: he integrates on 12 August, after the first order but before any second penalty is imposed. Under the proviso, the Commissioner shall waive the Rs. 500,000. His penalty under serial 25A falls to nil.

What if the retailer is not registered at all?

Serial 25A also covers a person who “fails to get himself registered under the Act”. Being unregistered is not a defence to the integration penalty; it is one of the defaults the entry lists.

Common mistakes

• Treating the amounts as maximums. Serial 25A states fixed sums: Rs. 500,000, Rs. 1 million, Rs. 2 million and Rs. 3 million. The “up to” wording belongs to serial 25.
• Expecting a waiver after the second order. The proviso works only if integration happens before the penalty for the second default is imposed.
• Integrating one outlet only. Rule 150ZER keeps sealed premises closed until all POS machines in all branches or outlets are integrated.
• Assuming integration ends the matter. Serial 25A, as amended by the Finance Act, 2025, also penalises failing to issue electronic invoices after integration.

What to check in the official text

Read serials 25 and 25A in the section 33 table of the Sales Tax Act, 1990 as amended to 30 June 2026, and section 23(5) and (6). Check the Board notification that fixes the date and manner of integration for Tier-1 retailers; it is not held on this site. The Sales Tax Rules, 2006 held here are amended only to 30 June 2025, and rule 150ZEP still cross-refers to an older Act provision whose integration proviso was omitted by the Finance Act, 2025. Check for later amendments to Chapter XIV-AD.