Sales Tax Act empowers FBR to suspend utility connections for unregistered or non-integrated Tier-1 retailers
ISLAMABAD: The Federal Board of Revenue (FBR) has the legal authority to order the disconnection of gas and electricity connections of certain Tier-1 retailers that fail to comply with mandatory sales tax registration and point-of-sale (POS) integration requirements under the Sales Tax Act, 1990, updated up to June 30, 2026.
Under the amended law, the FBR may issue a Sales Tax General Order (STGO) directing gas and electricity distribution companies to disconnect utility services of specified businesses, notwithstanding any other provision of the Sales Tax Act or any other law.
Which businesses are affected?
The provision applies to two categories of businesses:
Persons, including Tier-1 retailers, that fail to register for sales tax.
Notified Tier-1 retailers that are registered for sales tax but fail to integrate their outlets with the FBR’s Computerised Point-of-Sale (POS) System.
According to the law, the measure is designed to strengthen tax compliance by ensuring that retailers fulfil mandatory registration obligations and report sales transactions to the FBR in real time.
Utility connections can be restored
The updated legislation also provides a mechanism for restoring utility services once businesses become compliant.
If an unregistered retailer completes sales tax registration or a notified Tier-1 retailer successfully integrates its outlet with the FBR’s Computerised System, the Board may issue another Sales Tax General Order instructing the relevant utility companies to restore the gas or electricity connection.
Digital enforcement to improve compliance
The mandatory POS integration programme enables the FBR to receive real-time sales data from large retailers, helping improve documentation of the economy, reduce tax evasion and strengthen sales tax collection.
The FBR has increasingly expanded the use of digital monitoring and enforcement tools in recent years, with utility disconnections forming part of its legal framework to ensure compliance among large retailers.
Tax experts say the latest provisions reinforce the government’s efforts to improve transparency in the retail sector while encouraging businesses to comply with registration and digital reporting requirements under the Sales Tax Act.