Is my restaurant, cafe or bakery a Tier-1 retailer?

A food outlet is a Tier-1 retailer when it meets at least one of the categories in clause (43A) of section 2 of the Sales Tax Act, 1990. One limb is enough. The categories were reshaped by the Finance Act, 2026, so a checklist written before July 2026 may test your outlet against rules that no longer exist.

What does the law say?

Section 2(43A) defines a “Tier-1 retailer” as “a retailer falling in any one or more of the following categories”. As amended to 30 June 2026, the categories still in force are:

Limb	Who it covers
(a)	A retailer operating as a unit of a national or international chain of stores
(b)	A retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks
(c)	A retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rs. 1,200,000
(d)	A wholesaler-cum-retailer with turnover of more than Rs. 200 million, engaged in bulk import and supply of consumer goods wholesale to retailers and retail to consumers
(gb)	A retailer with turnover exceeding Rs. 200 million in the immediately preceding twelve consecutive months, declared or worked back from tax deducted under section 236G or 236H of the Income Tax Ordinance
(h)	Any other person or class of persons prescribed by the Board

A proviso added to limb (h) by the Finance Act, 2026 also lets the Board exclude any person or class of persons by notification in the official Gazette.

Does a restaurant or bakery count as a “retailer” at all?

Section 2(28) defines a retailer as a person supplying goods to the general public for the purpose of consumption. The Act does not say in terms whether a sit-down restaurant serving meals is a retailer. It does, however, refer to food outlets in the Tier-1 context. Serial 87 of Table-1 of the Eighth Schedule gives a reduced rate for local supply of vermicelli, sheer mal, bun and rusk, but excludes “those sold in bakeries, and sweet shops falling in the category of Tier-1 retailers”. So the Act itself treats a bakery or sweet shop as capable of being Tier-1.

How do I test my own outlet?

Take the limbs one at a time and stop when one fits.

1. Chain or franchise. Is the outlet one unit of a national or international chain of stores? If yes, limb (a) applies. The Act does not define “chain” or mention franchises, so a franchise outlet has to be tested against those words.
2. Location. Is the outlet inside an air-conditioned shopping mall, plaza or centre? A cafe or bakery counter there is caught by limb (b) whatever its size, unless it is a kiosk. The Act does not define “kiosk”.
3. Electricity. Add up the outlet’s electricity bills for the last twelve consecutive months. Ovens, chillers and air-conditioning make this limb more relevant for food businesses than for many shops. Above Rs. 1,200,000, limb (c) applies.
4. Turnover. Is turnover over the last twelve consecutive months above Rs. 200 million, declared or worked back from advance income tax collected under section 236G or 236H? If yes, limb (gb) applies.
5. Board notification. Has the Board prescribed your outlet or its class under limb (h)? Such notifications are not held in this corpus.

Worked example (illustrative figures)

Three made-up food outlets in Karachi:

Outlet	Facts	Result
Shireen Bakers, Tariq Road	Street-level bakery, one branch, bills Rs. 85,000 a month, turnover Rs. 40 million	12 x Rs. 85,000 = Rs. 1,020,000. Below Rs. 1,200,000. No other limb fits, so not Tier-1 on these facts
Chai Corner, food court of an air-conditioned mall	Small cafe unit with its own counter, bills Rs. 30,000 a month	Limb (b) can fit, unless the unit is a kiosk. Size and bill do not matter for this limb
Karahi House, Clifton	Single restaurant, bills Rs. 110,000 a month	12 x Rs. 110,000 = Rs. 1,320,000. Above Rs. 1,200,000, so limb (c) applies

If Shireen Bakers’ monthly bill rose to Rs. 105,000, the twelve-month total would be 12 x Rs. 105,000 = Rs. 1,260,000, and limb (c) would then apply.

What changes once an outlet is Tier-1?

Sales tax. Section 3(9) charges retailers other than Tier-1 through their monthly electricity bills. Section 3(9A) instead makes Tier-1 retailers pay sales tax “at the rate as applicable to the goods sold”. The general rate in section 3(1) is eighteen per cent, with other rates and exemptions set by the schedules. For restaurants, Table-2 of the Sixth Schedule (local supplies) lists “Prepared food or foodstuff supplied by Restaurants and caterers” as an exempt supply at serial 53. The Act does not explain separately how that exemption sits with section 3(9A), so this page does not resolve it.

Integration. The proviso to section 23(6) requires all Tier-1 retailers to integrate their retail outlets with the Board’s computerized system for real-time reporting of sales, from the date and in the manner the Board prescribes.

Provincial tax. Sales tax on restaurant services in Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan is levied under provincial laws that are outside this corpus.

Common mistakes

• Thinking every limb must be met. The definition says “any one or more”.
• Measuring the floor. Shop area has not been a test since the Finance Act, 2023.
• Counting only one month’s bill. Limb (c) looks at the cumulative bill over the immediately preceding twelve consecutive months.
• Relying on the card machine. The card-payment limb was omitted by the Finance Act, 2026.

What to check in the official text

Read clause (28) and clause (43A) of section 2, section 3(9) and (9A), and the proviso to section 23(6) of the Sales Tax Act as amended to 30 June 2026. Check serial 53 of Table-2 of the Sixth Schedule and serial 87 of Table-1 of the Eighth Schedule in the official PDF. Check also whether the Board has issued a notification under limb (h) naming or excluding food outlets. Those notifications are not in this corpus.