Wholesalers and distributors

Withholding on sales to distributors and retailers, sales tax registration and invoicing. Each answer below explains one point in plain words, works through an example, and links the exact section of the law it relies on.

• What is the 236G rate for a distributor on the Active Taxpayers List and for one who is not?For tax year 2027, 236G is 0.1% on non-fertilizer goods and 0.7% on fertilizer. A buyer off the Active Taxpayers' List pays 2% on non-fertilizer goods.
• What section 236H rate applies when the retailer I sell to is not on the Active Taxpayers List?A distributor collects 236H at 0.5% from a retailer on the Active Taxpayers List but 2.5% from one who is not, under the Tenth Schedule for tax year 2027.
• Is 236G and 236H tax final, or can I adjust it against my income tax and claim a refund of any excess?Tax collected under sections 236G and 236H is credited against the buyer's income tax for the year, and any excess can be claimed back under section 170.
• Can FBR register me and assess sales tax from my 236G purchase data if I have not registered?Section 14(2A) of the Sales Tax Act allows compulsory registration, and section 11D(5) lets an officer assess tax on value addition using 236G purchase data.
• Can further tax be offset against input tax, and can a buyer claim further tax charged to it as input tax?Section 7(1) of the Sales Tax Act excludes further tax from the output tax that input tax reduces, and buyers charged further tax are barred from input tax.
• Can a distributor carry forward minimum tax paid above its normal tax to later years?Section 113(2)(c) lets a distributor carry forward minimum tax paid above its normal tax and adjust it against normal tax in the next two tax years only.
• If my minimum tax on turnover is more than my normal tax, can I carry the excess forward?Section 113(2)(c) lets excess minimum tax be adjusted against normal tax in the next two tax years, and the whole amount is carried forward in a loss year.
• What happens to a distributor who fails to collect or deposit 236G or 236H tax?A distributor that does not collect or deposit 236G or 236H tax becomes personally liable under section 161, with a penalty, and the buyer can be pursued too.
• What happens to a distributor who fails to collect or deposit 236H tax from retailers?Under section 161 a distributor that fails to collect 236H tax, or collects it and keeps it, is personally liable for it, plus 12% default surcharge.
• Do sections 236G and 236H still apply only to listed sectors like pharma, FMCG and cement, or to all goods?The Finance Act 2024 omitted the sector list from sections 236G and 236H, so both now read without a sector limit. A leftover phrase in 236H is unclear.
• Do 236G and 236H now apply to every kind of goods, or only to the old list of sectors?The Finance Act, 2024 omitted the sector lists from sections 236G and 236H, so as amended to 30 June 2026 neither section is limited to pharma, FMCG or cement.
• Will I lose input tax if I pay my supplier in cash or pay a credit invoice late?Section 73 of the Sales Tax Act requires banking-channel payment above Rs. 50,000 per supplier per tax period and payment of credit invoices within 180 days.
• Do wholesalers and distributors have to issue electronic invoices integrated with FBR?Section 23 of the Sales Tax Act lets the Board require e-invoices and real-time FBR integration by notification. Rules 150R to 150X set the duties that follow.
• As a distributor, do I have to collect section 236H advance tax when I sell to shopkeepers, and at what rate?Distributors, dealers and wholesalers must collect section 236H advance tax on sales to retailers: 0.5% of gross sales, or 2.5% if the retailer is off the ATL.
• Can a distributor adjust all its input tax, or does the 90% limit in section 8B apply?Section 8B of the Sales Tax Act caps input tax adjustment at 90% of output tax in each tax period, with a fixed asset exception and a yearly adjustment route.
• Does the 90% input tax limit in section 8B apply to distributors?Section 8B of the Sales Tax Act caps input tax at 90% of output tax each month for registered persons, distributors included, unless the Board excludes them.
• What is further tax, and is the extra 4% on sales to unregistered buyers still charged in 2026-27?Section 3(1A) of the Sales Tax Act, as amended to 30 June 2026, still charges further tax at 4% on taxable supplies to unregistered or non-active buyers.
• Do I charge further tax if my buyer is registered for sales tax but not on the Active Taxpayers List?Section 3(1A) of the Sales Tax Act charges 4% further tax where the buyer is not an active taxpayer, even if registered. Rule 12A explains when that happens.
• Can my input tax be reduced because I sell to unregistered shopkeepers?Section 73(4) of the Sales Tax Act bars input tax on supplies to unregistered persons above a Board-prescribed amount. Section 8(1)(m) adds a pro rata bar.
• What happens to my input tax if my supplier is suspended, blacklisted or found issuing fake invoices?Under section 21 of the Sales Tax Act, invoices of a suspended supplier give no input tax, and once blacklisted, past claims face rejection by appealable order.
• Is 236G or 236H tax a final cost, or can I adjust it against my income tax and get a refund of any excess?Tax collected under 236G and 236H is adjustable. Section 168 treats it as tax paid, and any excess over the year's tax can be refunded under section 170.
• What happens if a distributor files the monthly sales tax return late or pays the tax late?A late sales tax return costs Rs. 50,000, or Rs. 2,000 a day within ten days. Late payment costs Rs. 50,000 or 5% of tax, plus default surcharge.
• What minimum tax on turnover applies to distributors under section 113 for tax year 2027?Finance Act 2026 removed distributors from the 0.25% minimum tax entry. For tax year 2027 the rate is 1.25%, or 0.5% for listed goods on both ATLs.
• What is the minimum tax on turnover for distributors and wholesalers in tax year 2027?For tax year 2027 most distributors pay the 1.25% minimum tax on turnover under section 113, or 0.5% for listed goods if on both Active Taxpayers' Lists.
• Do I as a distributor or wholesaler have to collect section 236H advance tax when I sell to shopkeepers?Section 236H makes distributors, dealers and wholesalers collect 0.5% advance tax on sales to retailers. The retailer gets credit for it against income tax.
• Do wholesalers and distributors have to issue electronic sales tax invoices integrated with FBR?Section 23 of the Sales Tax Act lets the Board require e-invoicing and FBR integration by notification. Once notified, rules 150R to 150X and a penalty apply.
• What is the penalty for not issuing a sales tax invoice or issuing an invoice without authority?Section 33 of the Sales Tax Act sets Rs. 25,000 or 5% of tax for not issuing an invoice, and Rs. 50,000 or 10% for an unauthorised one, as amended in 2026.
• What records and stock registers must a registered wholesaler keep, for how long, and what if stock does not match the books?Section 22 of the Sales Tax Act lists the records a wholesaler keeps, section 24 sets six years, and section 11D allows best judgment if they are missing.
• What records and stock register must a registered wholesaler keep, and for how long?Section 22 of the Sales Tax Act lists the records a registered wholesaler keeps, section 24 sets six years' retention, and section 25 lets officers audit them.
• Does a distributor who sells only exempt goods have to register for sales tax?Section 14(1) ties sales tax registration to taxable supplies. A trader in Sixth Schedule exempt goods only is outside it; adding taxable goods changes that.
• Is sales tax registration compulsory for a wholesaler or distributor even if turnover is small?Section 14(1)(e) of the Sales Tax Act lists wholesalers, dealers and distributors making taxable supplies as required to register, with no turnover limit.
• When is a distributor's monthly sales tax return due and what are the penalties for filing or paying late?Under the Sales Tax Act the return is due on the 15th of the next month. Late filing costs Rs. 50,000, late payment Rs. 50,000 or 5%, plus default surcharge.
• How much sales tax can a company withhold when it buys from a registered distributor, and is it excluded for Third Schedule goods?The Eleventh Schedule sets 1/10th of invoice sales tax for active distributors and 5% of gross value for non-active suppliers, excluding Third Schedule goods.
• When a company or government department buys from me, how much sales tax can it withhold?The Eleventh Schedule sets withholding at 1/10th of invoice tax for an active distributor, 1/5th for other active taxpayers, and more for non-active suppliers.
• How much income tax does a company deduct under section 153 when it buys goods from me as a distributor?Section 153 rates on goods for tax year 2027: 5% or 5.5% generally, 2.5% for cigarette and 1% for pharma distributors, 0.25% for listed goods on both ATLs.
• How much section 153 tax does a company deduct when paying a distributor for goods, and is it minimum or adjustable tax?Section 153 tax on payments to distributors for goods is 5.5% or 5%, cut to 0.25% or 1% for some goods, and is minimum tax unless the seller is a manufacturer.
• What is section 236G advance tax and who collects it from distributors and wholesalers?Section 236G makes manufacturers and commercial importers collect advance tax when they sell to distributors, dealers and wholesalers. The buyer gets credit.
• What is the section 236G rate for tax year 2027 for a distributor on the Active Taxpayers List and one who is not?Section 236G rates for tax year 2027: 0.1% on most goods and 0.7% on fertilizer for listed buyers, and 2% on non-fertilizer goods for buyers off the list.
• If the manufacturer paid sales tax on the printed retail price of Third Schedule goods, does a distributor charge sales tax or further tax again?Section 3(2)(a) of the Sales Tax Act taxes Third Schedule goods at 18% of printed retail price. What the text says on a distributor's resale and further tax.
• What must a sales tax invoice issued by a wholesaler or distributor show?Section 23 of the Sales Tax Act lists the particulars of a tax invoice: supplier and buyer details, date, description, quantity, value, tax and an e-Bilty link.
• What must a distributor's sales tax invoice contain, including the CNIC or NTN of an unregistered buyer?Section 23 of the Sales Tax Act lists what a tax invoice must show, and section 8(1)(m) cuts input tax if an unregistered distributor's NIC or NTN is missing.
• When do I have to charge 4% further tax on a sale to an unregistered buyer or one not on the active taxpayers list, and is it still in force?Section 3(1A) of the Sales Tax Act, amended to 30 June 2026, still levies 4% further tax on supplies to unregistered buyers and to buyers who are not active.
• Which purchases can a wholesaler not claim input tax on?Section 8 of the Sales Tax Act bars input tax on fake invoices, unpaid or undeclared supplier tax, personal use and vehicles or furniture not bought for resale.
• How do I tell whether a buyer is a wholesaler (236G) or a retailer (236H) when collecting advance tax?Section 236G applies when a manufacturer or importer sells to distributors and wholesalers, 236H on sales to retailers. What the law defines, and what not.