Retailers with declared or worked-back annual turnover above Rs200 million will fall under the revised Tier-1 category from Tax Year 2027.
ISLAMABAD: The Federal Board of Revenue (FBR) has revised the criteria for Tier-1 retailers, bringing retailers with declared annual turnover exceeding Rs200 million within the Tier-1 category from Tax Year 2027 onwards.
The FBR issued Circular No. 1 of 2026, explaining major amendments to the Sales Tax Act, 1990 and Federal Excise Act, 2005 introduced through the Finance Act, 2026.
According to the circular, several changes have been made to the definition of a “Tier-1 Retailer”, establishing a turnover-based threshold while easing certain requirements for smaller retailers.
Rs200m turnover threshold introduced
Under the amended definition, a wholesaler-cum-retailer engaged in the bulk import and wholesale supply of consumer goods to retailers, as well as retail sales to the general public, will fall within the Tier-1 category where its turnover exceeds Rs200 million.
The revised criteria provide a clearer turnover-based test for determining which retailers are required to fall within the Tier-1 category.
Digital payment condition removed
The FBR has also removed a provision that previously classified retailers as Tier-1 retailers if they had acquired a point-of-sale facility to accept payments through debit or credit cards from banking companies or through other digital payment channels.
The relevant sub-clause has been omitted, with the FBR stating that the change is intended to facilitate small retailers with lower annual turnover and limited business activity.
The amendment means that offering digital payment facilities alone will no longer trigger Tier-1 retailer classification under the omitted provision.
Worked-back turnover based on withholding tax
Another significant change concerns retailers whose deductible withholding tax under sections 236G and 236H of the Income Tax Ordinance, 2001 exceeded a threshold prescribed by the Board during the immediately preceding 12 consecutive months.
The previous sub-clause (g) has been omitted and replaced with a new sub-clause (gb).
Under the new provision, a retailer will be categorised as a Tier-1 retailer if its declared turnover exceeds Rs200 million.
The same treatment will apply where the retailer’s worked-back turnover, calculated from tax deductions under sections 236G and 236H during the immediately preceding 12 consecutive months, exceeds Rs200 million.
Revised Tier-1 framework from Tax Year 2027
The amendments establish a more defined turnover-based test for identifying Tier-1 retailers while removing provisions that could bring smaller retailers into the category solely because they offered digital payment facilities.
The revised framework will apply from Tax Year 2027 onwards and forms part of the government’s wider changes to the sales tax and federal excise regime introduced through the Finance Act, 2026.
The changes are expected to provide greater clarity for retailers regarding their classification and applicable obligations under the amended tax framework.