Sales Tax General Order No. 11 of 2026 provides implementation guidelines for footwear supplied through FBR digitally integrated and POS-compliant retail outlets.
ISLAMABAD: The Federal Board of Revenue (FBR) has issued Sales Tax General Order (STGO) No. 11 of 2026 to clarify the implementation of Serial No. 65 of the Third Schedule to the Sales Tax Act, 1990, providing certainty on the sales tax treatment of footwear supplied through FBR digitally integrated and Point of Sale (POS)-compliant retailers.
The General Order, effective from July 1, 2026, addresses implementation and interpretation issues raised by the Pakistan Footwear Manufacturers Association (PFMA) following amendments introduced through the Finance Act, 2026.
FBR clarifies footwear taxation
Under Section 3(2)(a) of the Sales Tax Act, 1990, sales tax on goods listed in the Third Schedule is generally charged on the basis of the retail price.
The Finance Act, 2026 inserted Serial No. 65 into the Third Schedule, bringing footwear of all types within the retail price-based taxation regime, except where manufacturers exclusively sell their products through their own FBR digitally integrated and POS-compliant retail outlets.
Following the amendment, the PFMA approached the FBR seeking clarification on practical and interpretational issues concerning the application of the new provisions.
Documented supply chains remain outside retail price regime
After reviewing the matter, the FBR observed that supplies made through documented and digitally verifiable supply chains, including transactions involving POS-integrated retailers, are fully traceable under the tax system.
The Board noted that footwear manufacturers supplying products to independent brand owners operating FBR digitally integrated and POS-compliant retail outlets generally do not determine the final retail price, as pricing decisions are made by retailers in accordance with prevailing commercial practices.
According to the FBR, the legislative intent behind Serial No. 65 is achieved so long as transactions remain within a documented and electronically verifiable supply chain.
Implementation Matrix issued
To ensure consistent application of the amended provisions, the FBR has issued an Implementation Matrix as part of STGO No. 11 of 2026.
Under the new framework:
• Registered manufacturers selling footwear through their own FBR digitally integrated and POS-compliant retail outlets will remain outside the retail price-based taxation regime under Serial No. 65. Sales tax will instead be charged on the value of supply as defined in Section 2(46) of the Sales Tax Act, 1990.
• Imports of footwear covered under Serial No. 65 will continue to attract sales tax on a value equal to 130 per cent of the value determined under Section 25 of the Customs Act, 1969, inclusive of applicable customs duties and Federal Excise Duty.
• Supplies made by importers to registered manufacturers or FBR digitally integrated and POS-compliant retailers will follow the same valuation mechanism.
• Footwear imported directly by FBR digitally integrated and POS-compliant retailers for sale to end consumers will also be taxed under the same framework.
• Supplies by digitally integrated registered manufacturers or registered importers to registered corporate entities, federal and provincial government departments, autonomous bodies and statutory organisations for their own use will likewise remain subject to the same basis for the levy and collection of sales tax.
Uniform implementation across Pakistan
The FBR has directed all Chief Commissioners Inland Revenue to ensure the strict, consistent and uniform implementation of the General Order across their respective jurisdictions.
The Board further stated that any issues relating to the interpretation or implementation of the order should be referred to the Inland Revenue (Policy Wing) for clarification.
Tax experts said the clarification is expected to remove uncertainty surrounding the taxation of footwear supplied through documented retail channels. They noted that the order supports the government’s broader objective of promoting digital documentation, improving tax compliance and encouraging retail businesses to operate through FBR-integrated POS systems.