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

What does the law say?

The penalties sit in the table in section 33 of the Sales Tax Act, 1990. Two serial numbers deal with a person who is required to integrate and does not.

Serial 25A covers a person required to integrate his business as stipulated in the Act who fails to get registered, or, if registered, “fails to integrate in the manner as required under the law and rules made thereunder”, or fails to issue electronic invoices after integration. The penalty climbs with each default:

Default	Penalty under serial 25A	Timing in the text
First	Rs. 500,000	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 this, the business premises “shall be liable to be sealed by an officer of Inland Revenue in the manner prescribed”. A proviso softens the first step: if the retailer integrates with the Board’s Computerized System before the penalty for the second default is imposed, the Commissioner shall waive the first penalty.

Serial 25, substituted by the Finance Act, 2026, covers a person required to integrate who fails to register or, if registered, fails to integrate “within the stipulated time as notified by the Board”. It provides a penalty of up to Rs. 1 million, and a second penalty of up to Rs. 5 million if the offence continues one month after the first penalty. It also says the premises are liable to be sealed with or without a penalty.

The duty itself comes from section 23(6), whose proviso says all Tier-1 retailers shall integrate their retail outlets with the Board’s computerized system for real-time reporting of sales, from the date and in the manner the Board prescribes. Section 3(9A) sets the rate a Tier-1 retailer pays: the rate applicable to the goods sold.

How does it work in practice?

The penalty is imposed by an order. Each later step in serial 25A counts from the order for the previous default, so the ladder cannot run faster than one step every fifteen days. The sealing procedure, including who reports the default and who approves sealing, is set out in Chapter XIV-AD of the Sales Tax Rules, 2006, which is covered on the sealing and de-sealing page.

Two further consequences run alongside the penalty:

• Gas and electricity. Section 14AB lets the Board, through a Sales Tax General Order, direct gas and electricity distribution companies to discontinue connections of any person, including Tier-1 retailers, who fails to register, and of notified Tier-1 retailers who are registered but not integrated. Once the retailer registers or integrates, the Board shall notify restoration through a Sales Tax General Order.
• Input tax. Section 8B(6) cuts adjustable input tax by 60% for any tax period in which an outlet was not integrated, even for part of the period.

Worked example (illustrative figures)

A shoe retailer in an air-conditioned mall in Lahore falls within Tier-1 but has not integrated. The dates and figures below are invented to show how serial 25A works.

1. 1 March: order for the first default. Penalty Rs. 500,000.
2. The retailer does nothing. More than fifteen days later, on 20 March, an order for the second default imposes Rs. 1,000,000. The first penalty is no longer eligible for waiver, because the second penalty has now been imposed.
3. Third default order on 10 April: Rs. 2,000,000.
4. Fourth default order on 30 April: Rs. 3,000,000.

Total under serial 25A: Rs. 500,000 + Rs. 1,000,000 + Rs. 2,000,000 + Rs. 3,000,000 = Rs. 6,500,000.

If instead the retailer had integrated on 10 March, before any second-default order, the Commissioner would have to waive the Rs. 500,000, leaving nil under serial 25A.

What if the retailer is not registered at all?

Both serials 25 and 25A cover a person who “fails to get himself registered” as well as one who is registered but not integrated. Section 14AB(a) separately allows gas and electricity disconnection for any person, including Tier-1 retailers, who fails to register.

What if the retailer integrated but stopped issuing electronic invoices?

The words “or fail to issue electronic invoices after integration”, added to serial 25A by the Finance Act, 2025, bring that case within the same ladder of penalties. Issuing invoices without the prescribed number or QR code is a separate offence under serial 24.

Which serial applies, 25 or 25A?

The text does not say. Both describe a failure to register or integrate, and the table does not state which takes priority or whether both can be imposed for the same default. The sealing procedure for non-integrated Tier-1 retailers in the Sales Tax Rules refers only to serial 25A. This page does not resolve the overlap.

Common mistakes

• Treating Rs. 500,000 as the whole exposure. It is only the first rung. Serial 25A reaches Rs. 3 million for the fourth default, and serial 25 allows up to Rs. 5 million for a continuing offence.
• Assuming the first penalty stays payable after integration. The serial 25A proviso requires waiver if integration comes before the second-default penalty is imposed.
• Thinking the penalty is the only cost. Section 8B(6) reduces input tax for every tax period with a non-integrated outlet, and section 14AB allows utility disconnection.
• Assuming a small shop is covered. These penalties apply to persons required to integrate. Who counts as a Tier-1 retailer is set by the definition in the Act; see the related page on that definition.

What to check in the official text

Read the section 33 table at serials 25 and 25A in the official PDF, because the table is not reproduced cleanly in the parsed text. Check section 23(6) for the integration duty and section 14AB (printed within the section 14 entry) for disconnection. The dates from which particular retailers must integrate are set by Board notifications that this site does not hold, so confirm any date in the notification itself.