As a Pakistani retailer, it is important to understand the distinction between Tier I and Tier II retailers when it comes to sales tax. Tier I retailers are bound to be registered with Sales Tax and must integrate a POS computerized system with the Federal Board of Revenue (FBR), while Tier II retailers are excluded from this integration. In this article, we will explain the differences between these two types of retailers and how they are taxed.
Defining Tier I Retailers
Tier I retailers are those who meet at least one of the following conditions:
- Their area of business is greater than 1000 sq ft and in case of furniture 2000 sq ft or more.
- Their cumulative electricity bill during the last twelve months is greater than twelve hundred thousand (1,200,000).
- They have a national or international chain of stores.
- They are operating in an air-conditioned shopping mall or plaza or shopping center.
- They have a debit or credit machine at the point of sale.
- They are an importer-cum-retailer who buys bulk amounts of goods and supplies them as a retailer and wholesaler.
- Their taxes are deducted under section 236G and 236F.
- They belong to any other person or class of persons prescribed by FBR.
- They are jewellers.
If any one or more of these conditions are fulfilled, then the retailer is considered a Tier I retailer and must register for Sales Tax and integrate a POS computerized system with the FBR.
Defining Tier II Retailers
Tier II retailers, on the other hand, are those who do not meet any of the above conditions. These retailers are excluded from the integration of POS computerized systems with the FBR and are not required to issue sales tax invoices.
Sales Tax Applicable to Tier II Retailers
Sales tax is not applicable to Tier II retailers. Instead, they are only charged sales tax on their electricity bills. If the electricity bill is up to Rs. 20,000, the sales tax rate is 5%. If the bill amount is greater than Rs. 20,000, the sales tax rate is 7.5%.
Maximizing Your Business
If you are a Tier I retailer, it is important to comply with the regulations and register for Sales Tax and integrate a POS computerized system with the FBR. This will not only keep you compliant with the law but also enable you to maximize your business potential.
As for Tier II retailers, it is important to keep your electricity bills in check and ensure that you are paying the correct amount of sales tax. It is also important to note that if your business expands and you meet any of the Tier I conditions, you will need to register for Sales Tax and integrate a POS computerized system with the FBR.
In conclusion, understanding the difference between Tier I and Tier II retailers is essential for Pakistani retailers. Compliance with the regulations set by the FBR will not only keep you on the right side of the law but also enable you to maximize your business potential. Keep in mind that if your business expands, you may need to register for Sales Tax and integrate a POS computerized system with the FBR.