As the tax landscape evolves, tax authorities in Pakistan have recently issued an updated definition of Tier-1 retailers for the Tax Year 2023-24.
The Federal Board of Revenue (FBR), the national tax agency, has implemented changes to the Sales Tax Act, 1990, effective from July 1, 2023, which now clearly defines what constitutes a Tier-1 retailer. These changes are aimed at ensuring a fair and effective taxation system for retailers operating in the country.
Definition of Tier-1 Retailers
According to the updated tax law, a Tier-1 retailer refers to any retailer falling under one or more of the following categories:
1. Retailer Operating as a Unit of a National or International Chain of Stores: A Tier-1 retailer includes any retailer that operates as a part of a national or international chain of stores. This category encompasses retail establishments that are part of larger retail conglomerates.
2. Retailer Operating in an Air-Conditioned Shopping Mall, Plaza, or Center (Excluding Kiosks): Retailers operating within air-conditioned shopping malls, plazas, or centers are also classified as Tier-1 retailers. However, kiosks are not included in this category.
3. Retailer Whose Cumulative Electricity Bill Exceeds Rupees Twelve Hundred Thousand in the Preceding Twelve Consecutive Months: A retailer is considered Tier-1 if their cumulative electricity bill over the past twelve consecutive months exceeds Rupees twelve hundred thousand. This criterion aims to include larger retailers with significant energy consumption in this tier.
4. Wholesaler-cum-Retailer Engaged in Bulk Import and Supply of Consumer Goods: Tier-1 retailers also include wholesalers who are actively engaged in both bulk import and supply of consumer goods on a wholesale basis to other retailers and on a retail basis to the general public.
5. Retailer Accepting Payment Through Debit/Credit Cards or Digital Payment Services: Any retailer who has acquired a point of sale system for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by the State Bank of Pakistan is considered a Tier-1 retailer.
6. Retailer Meeting Specified Deductible Withholding Tax Threshold: Retailers whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance, 2001, has exceeded the threshold specified by the Board during the preceding twelve consecutive months will be classified as Tier-1 retailers.
7. Any Other Person or Class of Persons as Prescribed by the FBR: The FBR reserves the right to classify any other person or class of persons as Tier-1 retailers as per their discretion and requirements.
With the issuance of the updated definition of Tier-1 retailers for Tax Year 2023-24, the FBR aims to streamline the taxation process for retailers in Pakistan. These changes will help in ensuring that larger retailers and those making significant financial transactions are appropriately identified and taxed according to their business operations.
The FBR’s efforts will contribute to a more equitable tax system, promoting transparency and compliance within the retail sector while generating revenue for the nation’s economic growth and development. Retailers falling under the Tier-1 category must now comply with the relevant tax regulations to avoid any penalties or legal consequences.
Disclaimer: The information provided in this article is for general informational purposes only and should not be considered as legal, financial, or tax advice. The Sales Tax Act and its regulations may be subject to changes and interpretations by relevant authorities. For accurate and up-to-date guidance on taxation matters, readers are advised to consult qualified professionals or refer to official government sources.