When does a bakery or restaurant have to register for federal sales tax?

Registration for federal sales tax turns on the categories in section 14(1) of the Sales Tax Act, 1990. For food outlets that sell to the public, the deciding category is the retailer one, and the deciding fact within it is whether the outlet is Tier-1.

What does the law say?

Section 14(1) requires every person making taxable supplies in Pakistan, in the course of a taxable activity, to register if it falls in any of these categories:

Clause	Category
(a)	A manufacturer who is not running a cottage industry
(b)	A retailer liable to pay sales tax under the Act or rules, excluding a retailer required to pay through the electricity bill under section 3(9)
(c)	An importer
(d)	An exporter who intends to obtain sales tax refund on zero-rated supplies
(e)	A wholesaler, dealer or distributor
(f)	A person required under another federal or provincial law to register for a levy collected as if it were sales tax

Section 2(28) defines a retailer as a person supplying goods to the general public for the purpose of consumption.

How does the Tier-1 test connect to registration?

Section 3(9) charges retailers “other than those falling in Tier-1” through their monthly electricity bills. Section 3(9A) makes Tier-1 retailers pay sales tax at the rate applicable to the goods sold. So:

• A Tier-1 bakery or restaurant is a retailer liable to pay sales tax under section 3(9A), and it is not paying under section 3(9). Clause (b) of section 14(1) catches it.
• A non-Tier-1 retail outlet pays through the electricity bill and is expressly excluded from clause (b).

Tier-1 status comes from clause (43A) of section 2: any one of being a unit of a national or international chain, operating in an air-conditioned mall or plaza (not a kiosk), electricity bills above Rs. 1,200,000 over the preceding twelve consecutive months, turnover above Rs. 200 million, or being prescribed by the Board.

Other categories still apply. A bakery that manufactures rusk or cakes and supplies them to other shops may be a manufacturer under clause (a), whatever its retail status. Section 2(16) treats preparing, mixing and packaging goods as manufacture.

What does registration trigger?

• Monthly returns. Section 26(1) requires every registered person to file a return by the due date, indicating purchases, supplies, tax due and tax paid.
• Tax invoices. Section 23(1) requires a registered person making taxable as well as exempt supplies to issue a tax invoice bearing a verifiable and unique FBR invoice number (a condition that applies from the time the Board notifies), with particulars such as value, tax and value including tax.
• 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.
• Input tax. Only a registered person can deduct input tax under the Act.

Worked example (illustrative figures)

Three made-up food businesses in Karachi:

Business	Facts	Registration position
Zam Zam Tikka, Saddar	Single street restaurant, electricity bills Rs. 70,000 a month	12 x Rs. 70,000 = Rs. 840,000, below Rs. 1,200,000. Not Tier-1 on these facts, pays via electricity bill, so outside section 14(1)(b)
Crumbs Cafe, air-conditioned mall on Shahrah-e-Faisal	Cafe unit with its own counter, not a kiosk	Tier-1 under limb (b) of section 2(43A), so must register under section 14(1)(b)
Al-Noor Bakers, Korangi	Street bakery, bills Rs. 60,000 a month, also supplies packed rusk to 40 shops	Not Tier-1 (12 x Rs. 60,000 = Rs. 720,000), but supplying manufactured goods to shops may bring it under clause (a) as a manufacturer

If Zam Zam Tikka’s bills rose to Rs. 105,000 a month, the twelve-month total would be 12 x Rs. 105,000 = Rs. 1,260,000, which crosses the limb (c) threshold and brings it under section 14(1)(b).

What if the outlet does not register?

Section 14(2A) lets the Commissioner, or another officer the Board authorises, compulsorily register a person after inquiry and a hearing. Section 14AB lets the Board direct gas and electricity companies to disconnect any person, including a Tier-1 retailer, who fails to register, and notified Tier-1 retailers who are registered but not integrated. Section 14AC sets out a staged bar on bank accounts for unregistered suppliers of taxable goods, but it comes into force only on a date the Board notifies.

Common mistakes

• Thinking turnover alone decides registration. Clause (b) turns on liability to pay sales tax, which for retailers turns on Tier-1 status.
• Forgetting the manufacturer category. Supplying baked goods to other shops can bring a small bakery into clause (a).
• Confusing federal and provincial registration. Provincial sales tax on restaurant services is a separate regime outside this corpus.

What to check in the official text

Read section 14, including sub-sections (1), (2A), 14AB and 14AC, sections 3(9) and 3(9A), clauses (16), (28) and (43A) of section 2, section 23 and section 26 of the Sales Tax Act as amended to 30 June 2026. Section 14(3) leaves the registration procedure to be prescribed by the Board by notification, so check the current notifications for the steps.