Is 236G or 236H tax a final cost, or can I adjust it against my income tax and get a refund of any excess?

Advance tax under sections 236G and 236H is an advance payment of the buyer’s own income tax, not a separate charge that is simply lost. For a trader working on thin margins, the amounts collected over a year on purchases can add up to more than the tax the Ordinance finally charges on the year’s income. When that happens, the law provides a route to get the excess back.

What does the law say?

Four provisions of the Income Tax Ordinance, 2001, as amended to 30 June 2026, work together.

• Section 236G(2) allows credit for tax collected on sales to a distributor, dealer or wholesaler “in computing the tax due by the distributor, dealer or wholesaler on the taxable income for the tax year in which the tax was collected.”
• Section 236H(2) does the same for tax collected from a retailer.
• Section 168(1)(b) says tax collected under Chapter XII, where sections 236G and 236H sit, “shall be treated as tax paid by the person from whom the tax was collected”. Section 168(2) allows a tax credit for it in the tax year in which it was collected.
• Section 170(1) lets a taxpayer who has paid tax in excess of the amount properly chargeable apply to the Commissioner for a refund of the excess.

Section 168(5) links the two ends: a tax credit for a tax year that cannot be credited for that year “shall be refunded to the taxpayer in accordance with section 170.”

Is it ever a final tax?

Section 168(3) lists the final taxes for which no credit is allowed. In the text as amended to 30 June 2026, sections 236G and 236H are not on that list. Their own sub-section (2) grants credit in terms.

Worked example (illustrative figures)

Zubair Traders is a wholesaler of household goods in Multan and is on the Active Taxpayers’ List. All figures below are invented for tax year 2027; the rate is the real Division XIV rate for goods other than fertilizer.

1. Purchases from manufacturers during the year: Rs. 80,000,000.
2. Section 236G collected at 0.1%: Rs. 80,000,000 x 0.1% = Rs. 80,000.
3. Tax computed on Zubair Traders’ taxable income for tax year 2027 (assumed): Rs. 50,000.
4. Credit for 236G tax collected: Rs. 80,000.
5. Tax payable after credit: Rs. 50,000 minus Rs. 80,000 = minus Rs. 30,000.
6. Excess credit of Rs. 30,000 cannot be used against tax for the year.

Under section 168(5), that Rs. 30,000 is dealt with under section 170. If the computed tax had been Rs. 110,000 instead, Zubair Traders would owe Rs. 110,000 minus Rs. 80,000 = Rs. 30,000, and there would be no refund.

The “tax due” in step 3 is whatever the Ordinance charges for the year, and other provisions can affect it. The related pages on minimum tax for distributors explain how a turnover-based minimum can change that figure.

How does the refund work?

Section 170 sets the process:

Step	What section 170 says
Application	In the prescribed form, verified in the prescribed manner (170(2)(a) and (b))
Time limit	Within three years of the later of the assessment order date for that tax year or the date the tax was paid (170(2)(c))
Use of the excess	First against any other tax due under the Ordinance, then against other outstanding taxes, and the remainder is refunded (170(3))
Decision	A written order within sixty days of the application, after an opportunity of being heard (170(4))
If refused or delayed	Appeal under Part III of the same Chapter of the Ordinance (170(5))

Section 170A adds that, commencing from tax year 2021, the Board may process and issue a refund to a taxpayer who has filed a return without requiring a refund application, to the extent the tax credit is verified by the Board’s computerised system, with payment made electronically to the taxpayer’s notified bank account.

What if I am not on the Active Taxpayers’ List?

The higher Tenth Schedule rate (2% for section 236G on non-fertilizer goods, 2.5% for section 236H) is still tax collected under sub-section (1) of those sections. Sections 236G(2) and 236H(2) allow credit for tax collected under sub-section (1) without distinguishing the rate. A buyer off the list pays much more up front, so an excess over the year’s tax is more likely.

What if the tax was collected in one year and the goods sold in the next?

The credit belongs to “the tax year in which the tax was collected”, under both sections. It is not moved to the year in which the stock is resold.

Common mistakes

• Adding 236G or 236H to the cost of goods and forgetting it. It is tax paid under section 168(1)(b), claimable as credit in the return.
• Assuming excess credit carries forward automatically. The Ordinance route for unused credit is a refund under section 170, as section 168(5) says.
• Missing the three-year window. Section 170(2)(c) fixes the time limit for the application.
• Claiming credit without the collection being made. The credit is for tax actually collected under sub-section (1).

What to check in the official text

Read sections 236G, 236H, 168, 170 and 170A of the Ordinance amended to 30 June 2026. The prescribed refund form and the verification manner referred to in section 170(2) are in rules that are not covered on this page, and the steps on FBR’s online system are outside the text held here.