The Federal Board of Revenue (FBR) has clarified the definition of Tier-1 retailers as outlined under the Sales Tax Act, 1990. This classification is significant for taxation purposes, particularly regarding compliance and documentation requirements.
According to the FBR, Tier-1 retailers include any retailer that meets one or more of the following criteria:
1. National or International Chain Stores: Retailers that are part of a national or international chain of stores are classified as Tier-1. This includes brands and franchises operating across multiple locations.
2. Retailers in Air-Conditioned Malls or Plazas: Those operating within air-conditioned shopping malls, plazas, or centers—excluding kiosks—fall under this category.
3. High Electricity Consumption: Retailers whose cumulative electricity bill for the preceding 12 consecutive months exceeds PKR 1,200,000 are categorized as Tier-1. This criterion serves as a proxy for identifying larger-scale operations.
4. Wholesaler-Cum-Retailers: Businesses engaged in both bulk imports and wholesale supplies of consumer goods, as well as direct retail sales to consumers, qualify as Tier-1 retailers.
5. Point-of-Sale (POS) Systems: Retailers who have installed point-of-sale systems for accepting payments via debit or credit cards or through digital payment service providers authorized by the State Bank of Pakistan are also included.
6. Withholding Tax Thresholds: Retailers whose deductible withholding tax under Sections 236G or 236H of the Income Tax Ordinance, 2001, exceeds thresholds specified by the FBR are considered Tier-1.
7. Other Criteria as Specified: Any other individuals or classes of persons designated by the FBR through official notification may also be classified as Tier-1 retailers.
The classification of Tier-1 retailers is designed to enhance transparency and ensure tax compliance, particularly for businesses operating on a larger scale. Such retailers are subject to specific documentation and filing requirements, including the integration of their POS systems with the FBR’s real-time sales monitoring system.
This framework allows the government to streamline revenue collection, reduce tax evasion, and promote fair taxation practices. Businesses classified under Tier-1 are advised to familiarize themselves with these obligations to avoid penalties and ensure smooth operations.