What minimum tax on turnover applies to distributors under section 113 for tax year 2027?

For tax year 2027 (1 July 2026 to 30 June 2027) the general minimum tax for a distributor is 1.25% of turnover. The lower rate of 0.25% that distributors of pharmaceuticals, fast moving consumer goods and cigarettes used to have was removed by the Finance Act, 2026. In its place, clause (24D) of the Second Schedule offers 0.5% for a listed set of goods, but only to distributors on both active taxpayers’ lists.

What does the law say?

Section 113(1) of the Income Tax Ordinance, 2001 applies to a resident company, a permanent establishment of a non-resident company, and an individual or association of persons having turnover of one hundred million rupees or above in tax year 2017 or any subsequent tax year. It bites where, for any reason (a loss, set-off of old losses, exemptions, credits, or allowances and deductions), the tax payable is less than the percentage of turnover in Division IX of Part I of the First Schedule.

When it applies, section 113(2) treats turnover as income, and the person pays minimum tax at the Division IX rate “instead of the actual tax payable”. Turnover under section 113(3)(a) means gross sales or gross receipts, exclusive of sales tax, federal excise duty and trade discounts shown on invoices or bills.

What changed for distributors in 2026?

Before 1 July 2026, serial number 3 of the Division IX Table began with “(a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes” at 0.25%. Section 5 of the Finance Act, 2026 says that entry “(a) shall be omitted”, and section 1 brings the Act into force on 1 July 2026 unless otherwise provided.

The same section of the Finance Act, 2026 substituted clause (24D) of Part II of the Second Schedule. The old clause gave 0.25% to distributors, dealers, sub-dealers, wholesalers and retailers of fast moving consumer goods, fertilizer, mobile phones, sugar, electronics, cement, steel and edible oil. The new clause, as printed in the Finance Act, 2026, reads:

“(24D) The rate of minimum tax under sub-section (1) of section 113, shall be 0.5% in the case of distributors, dealers, sub-dealers, wholesalers of goods specified in the following Table, subject to the conditions that beneficiaries of reduced rate are appearing on the active taxpayers’ lists issued under the provisions of the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001 (XLIX of 2001):”

Retailers, cement, steel and edible oil are no longer named.

What rates apply for tax year 2027?

Distributor type	Rate of turnover	Source
Distributor of goods in the clause (24D) Table, on both active taxpayers’ lists	0.5%	Second Schedule, clause (24D)
Petroleum agents and distributors registered under the Sales Tax Act, 1990	0.25%	Division IX, S. No. 3(b)
Rice mills and dealers	0.25%	Division IX, S. No. 3(c)
Any other distributor, including one not on both lists	1.25%	Division IX, S. No. 4, “In all other cases”

The clause (24D) Table has 14 entries: pharmaceutical; fertilizer; cigarette; sugar; locally manufactured mobile phones; fresh and frozen food in canned or packaged form; electronics; beverages and dairy products; pasta, cereals, biscuits, nuts, snacks and similar packaged food items; condiments and baking items in bottled or packaged form; skincare and cosmetics, haircare, oral care, baby care; cleaning agents; toilet paper, paper towels, facial tissues, napkins and similar products; and trash bags, aluminum foil, air freshener and insect sprays.

Worked example (illustrative figures)

Three distributors in Hyderabad each have turnover of Rs. 300,000,000 for tax year 2027, net of sales tax. In each case assume normal tax on profit is lower than minimum tax, so section 113 applies.

Distributor	Rate	Arithmetic	Minimum tax
Biscuits and snacks, on both active taxpayers’ lists	0.5%	300,000,000 × 0.5%	Rs. 1,500,000
Biscuits and snacks, on the income tax list only	1.25%	300,000,000 × 1.25%	Rs. 3,750,000
Cement dealer, on both lists	1.25%	300,000,000 × 1.25%	Rs. 3,750,000

For comparison, the first distributor at the old 0.25% rate would have paid 300,000,000 × 0.25% = Rs. 750,000. The listed-goods rate has doubled, and missing one active taxpayers’ list multiplies it by two and a half.

What if …?

What if my normal tax is higher than minimum tax? Section 113 applies only where tax payable is less than the Division IX percentage of turnover. If normal tax is higher, you pay normal tax.

What if minimum tax exceeds normal tax? The excess can be carried forward under section 113(2)(c) for two tax years. That is covered on a separate page.

What if I distribute several kinds of goods? Clause (24D) applies to distributors “of goods specified in the following Table”. It does not say how to treat a distributor whose turnover mixes listed and unlisted goods.

Common mistakes

• Relying on the 0.25% rate. Entry 3(a) was omitted from 1 July 2026.
• Assuming cement, steel or edible oil still qualify. They are not in the new clause (24D) Table.
• Ignoring the two-list condition. Clause (24D) needs both active taxpayers’ lists.
• Including sales tax in turnover. Section 113(3)(a) excludes it.

What to check in the official text

Read section 113 and the Division IX Table. Our copy of serial number 1 of that Table is partly illegible across pages 529 and 530 of the official PDF, so this page does not state which persons are listed there; check it against the PDF. Also read clause (24D) with its Table, and section 5 of the Finance Act, 2026. Section 113 does not itself explain how it interacts with withholding taxes that other provisions treat as minimum tax, and this page does not resolve that.