How do I tell whether a buyer is a wholesaler (236G) or a retailer (236H) when collecting advance tax?

The first test is not the buyer at all but the seller. Section 236G of the Income Tax Ordinance, 2001 only ever applies to a manufacturer or commercial importer. Section 236H applies to a wider group of sellers and turns on whether the buyer is a retailer, or, in one limb, another wholesaler buying from a distributor or dealer.

What does the law say?

Section 236G says every manufacturer or commercial importer, “at the time of sale to distributors, dealers and wholesalers”, shall collect advance tax at the rate in Division XIV of Part IV of the First Schedule from the buyer. Credit for that tax is allowed to the distributor, dealer or wholesaler for the tax year in which it was collected.

Section 236H says every manufacturer, distributor, dealer, wholesaler or commercial importer, at the time of sale to retailers, “and every distributor or dealer to another wholesaler in respect of the said sectors”, shall collect advance tax at the rate in Division XV of Part IV. Credit is allowed to the retailer.

The rates for tax year 2027 (1 July 2026 to 30 June 2027) in the First Schedule are:

Section	Seller	Buyer	Rate
236G	Manufacturer or commercial importer	Distributor, dealer or wholesaler	0.7% fertilizers; 0.1% other goods
236G proviso	Same	Fertilizer distributor, dealer or wholesaler on both active taxpayers’ lists	0.25%
236H	Manufacturer, distributor, dealer, wholesaler or commercial importer	Retailer	0.5% of gross amount of sales
236H second limb	Distributor or dealer	Another wholesaler	0.5% (same Division)

What does the law define, and what does it leave out?

The Ordinance defines only one of the terms. Section 2(18A) says a distributor “means a person appointed by a manufacturer, importer or any other person for a specified area to purchase goods from him for further supply”. There is no definition of retailer, wholesaler or dealer in section 2 of the Ordinance.

The Sales Tax Act, 1990 defines all three in its own section 2:

• Distributor, clause (7): the same appointed-for-an-area wording, plus “a person who in addition to being a distributor is also engaged in supply of goods as a wholesaler or a retailer”.
• Retailer, clause (28): a person “supplying goods to general public for the purpose of consumption”. A proviso requires a person who combines import, manufacture or production with retail to notify and advertise wholesale and retail prices separately, and declare the addresses of retail outlets.
• Wholesaler, clause (47): “includes a dealer” and means any person who carries on the business of buying and selling goods by wholesale, or supplying or distributing goods by wholesale, and includes a person supplying taxable goods to a person who deducts income tax at source under the Ordinance.

Neither section 236G nor section 236H says that the Sales Tax Act definitions apply to them. Using those definitions as a guide is a reading, not a rule stated in the Ordinance. This page does not resolve that gap.

How does it work in practice?

Ask three questions in order:

1. Am I a manufacturer or commercial importer? If not, section 236G never applies to your sales.
2. Is my buyer supplying goods to the general public for consumption? If yes, the sale looks like a sale to a retailer under 236H.
3. Is my buyer another wholesaler, and am I a distributor or dealer? If yes, the second limb of 236H may apply.

The second limb has a drafting problem. The words “in respect of the said sectors” once pointed to a list of sectors (pharmaceuticals, electronics, sugar, cement and others) in section 236H(1). The consolidated text shows that list was omitted by the Finance Act, 2024. The phrase “the said sectors” now has nothing to refer back to. The Ordinance does not say how the limb applies after that omission.

Worked example (illustrative figures)

A biscuit manufacturer in Lahore sells in one month:

Buyer	Sale value	Section	Rate	Tax collected
Bilal Traders, its appointed distributor for Gujranwala	Rs. 5,000,000	236G	0.1%	Rs. 5,000
A single shop buying direct	Rs. 400,000	236H	0.5%	Rs. 2,000

Arithmetic: 5,000,000 × 0.1% = 5,000. 400,000 × 0.5% = 2,000.

Bilal Traders then sells:

Buyer	Sale value	Section	Rate	Tax collected
Kiryana shops selling to households	Rs. 3,000,000	236H	0.5%	Rs. 15,000
Rehman Wholesale, which resells to smaller shops	Rs. 1,000,000	236H second limb, if it applies	0.5%	Rs. 5,000

Arithmetic: 3,000,000 × 0.5% = 15,000. 1,000,000 × 0.5% = 5,000. The second row depends on how “the said sectors” is read, as explained above.

Bilal Traders does not collect under section 236G on either sale, because it is not a manufacturer or commercial importer.

What if …?

What if one buyer does both wholesale and retail? Neither section says how to split a sale to a buyer who both resells and sells to the public. The Sales Tax Act definition of distributor expressly covers a person who is also a wholesaler or retailer, but that definition is not written into sections 236G or 236H.

What if the buyer is a Tier-1 retailer? Tier-1 status is a Sales Tax Act concept under section 2(43A). Section 236H does not distinguish Tier-1 retailers from other retailers; it refers only to “retailers”.

What if I sell to a company or other large buyer? The buyer may have its own duty to deduct tax from the payment it makes to you under a different withholding section, with different rates. That is covered on a separate page in this category.

Common mistakes

• Distributors collecting 236G. Section 236G(1) names only the manufacturer or commercial importer as collector.
• Assuming the Ordinance defines “retailer”. It does not. Only “distributor” is defined, in section 2(18A).
• Using old sector lists. Guidance written before the Finance Act, 2024 lists sectors in section 236H. The consolidated text shows that list omitted.
• Charging 236H on the net of tax. Division XV applies the rate “on the gross amount of sales”.

What to check in the official text

Read sections 236G and 236H, clause (18A) of section 2 of the Ordinance, and clauses (7), (28) and (47) of section 2 of the Sales Tax Act. Check Divisions XIV and XV of Part IV of the First Schedule for the rates, and the footnotes to section 236H showing the Finance Act, 2024 omission. Higher rates for buyers not on the active taxpayers’ list are covered on a separate page.