I sell wholesale and to walk-in customers. When am I treated as a Tier-1 retailer?

A mixed wholesale and retail trader is Tier-1 once turnover passes Rs. 200 million, under either of two limbs of section 2(43A) of the Sales Tax Act, 1990. The Finance Act, 2026 added the turnover condition to the wholesaler-cum-retailer limb (d) and created a new limb (gb) that measures turnover for any retailer, including by working back from advance income tax collected by suppliers.

What does the law say?

Limb (d): the wholesaler-cum-retailer. Section 2(43A)(d), as amended, covers “a wholesaler-cum-retailer having turnover more than two hundred million, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”. Section 4 of the Finance Act, 2026 inserted the words “having turnover more than two hundred million rupees”. Before that, the limb had no turnover floor.

Limb (gb): turnover, declared or worked back. Section 4 of the Finance Act, 2026 also inserted limb (gb): “a retailer having turnover exceeding two hundred million rupees either by way of declaration or from worked back value of turnover from tax deduction under section 236G or 236H of Income Tax Ordinance, 2001 … during the immediately preceding twelve consecutive months”.

The two income tax sections it points to.

• Section 236G requires every manufacturer or commercial importer, at the time of sale to distributors, dealers and wholesalers, to collect advance tax at the rate in Division XIV of Part IV of the First Schedule.
• Section 236H requires every manufacturer, distributor, dealer, wholesaler or commercial importer, at the time of sale to retailers, to collect advance tax at the rate in Division XV of Part IV of the First Schedule.

Both sections allow the buyer credit for the tax collected against tax due for the tax year in which it was collected.

What are the collection rates?

For tax year 2027 (1 July 2026 to 30 June 2027), the First Schedule and Tenth Schedule set these rates:

Section	Rate for a buyer on the active taxpayers’ list	Rate for a buyer not on the list (Tenth Schedule)
236G, sales other than fertilizers	0.1%	2%
236G, fertilizers	0.7% (0.25% if on both the income tax and sales tax active lists)	Not listed in the Tenth Schedule table
236H, sales to retailers	0.5% of the gross amount of sales	2.5% of the gross amount of sales

The rate matters for limb (gb). The same amount of tax works back to very different values depending on which rate was applied.

How does it work in practice?

Limb (d) is narrow by its words. It speaks of a trader “engaged in bulk import and supply of consumer goods” to retailers and to the public. The Act does not say whether a trader who buys locally and never imports falls in limb (d).

Limb (gb) is wider. It applies to “a retailer”, so a mixed trader who does not fit limb (d) can still be caught once turnover exceeds Rs. 200 million over the immediately preceding twelve consecutive months. “Turnover” is not defined in section 2 of the Sales Tax Act, and the Act does not set out how the worked-back value is calculated.

Worked example (illustrative figures)

Haji Traders in Faisalabad buys packaged foods and toiletries from manufacturers and sells to small shops and to walk-in customers. The owner declares turnover of Rs. 150 million for the last twelve months. Its suppliers collected Rs. 1,100,000 under section 236H on sales to it over the same twelve months (made-up figures).

Step 1: the declared figure. Rs. 150 million does not exceed Rs. 200 million, so declaration alone does not bring it into limb (gb).

Step 2: working back at 0.5%. If Haji Traders is on the active taxpayers’ list, the Division XV rate is 0.5%. Rs. 1,100,000 / 0.005 = Rs. 220,000,000. The gross value of goods sold to it on which the tax was collected is Rs. 220 million.

Step 3: working back at 2.5%. If it is not on the list, the Tenth Schedule rate is 2.5%. Rs. 1,100,000 / 0.025 = Rs. 44,000,000, or Rs. 44 million.

Step 4: compare. At 0.5%, the worked-back figure of Rs. 220 million exceeds Rs. 200 million, which is the kind of figure limb (gb) is aimed at. At 2.5%, it does not.

The arithmetic in Steps 2 and 3 gives the value of the trader’s purchases, not its sales. Limb (gb) calls the result “worked back value of turnover” but does not say whether a mark-up is added or how purchases are converted into turnover. That gap is in the law itself.

What if …?

What if my turnover is below Rs. 200 million but my shop is in an air-conditioned market? Limb (b) covers a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks, with no turnover test. One limb is enough.

What if I only sell wholesale? Section 2(43A) defines categories of retailer. A “retailer” under section 2(28) is a person supplying goods to the general public for consumption. A purely wholesale business is outside that definition on its words, so the Tier-1 limbs do not describe it.

What if the Board excludes my trade? The proviso added to limb (h) by the Finance Act, 2026 lets the Board exclude any person or class of persons by notification. Any such notification is not held here.

Common mistakes

• Assuming all wholesaler-cum-retailers are Tier-1. Since 1 July 2026, limb (d) needs turnover of more than Rs. 200 million.
• Watching only declared sales. Limb (gb) lets turnover be worked back from section 236G and 236H tax, so supplier-collected tax is part of the picture.
• Applying the wrong rate when working back. The 0.5% and 2.5% rates for section 236H give figures five times apart.

What to check in the official text

Read limbs (d), (gb) and (h) of section 2(43A) of the Sales Tax Act as amended to 30 June 2026 and section 4 of the Finance Act, 2026. For the collection rates, read Divisions XIV and XV of Part IV of the First Schedule and the Tenth Schedule of the Income Tax Ordinance as amended to 30 June 2026, and keep the section 236G and 236H collection records your suppliers give you.