A. BACKGROUND

1. ASIF KASBATI on AAJ TV | Show "Budget Aik Jaiza by Imran Sultan"  about 4 years ago when the undersigned highlighted Broadening the Tax Base to the whole Supply Chain considering Withholding tax data analysis and Para C and same is being implement now so be ready as per para B.  

2. This also refers to the related Important TLQCs in trail blue, italic and double Line (a) 3326 of 28.10.25 about Salaried Class Rs 130B Tax; Exporters, Wholesalers, Retailers together Rs 60B Only (b) 2625 of 31.1.24 about SST on Distributors - SCP order against taxpayers’ expected & KCV

3. Also refer to several Other TLQC including (a) 3076 of 5.4.25 about Salaried class Tax 1350% more than Retailer and Overall 515B Shortfall (b) 2548 of 24.11.23 about Dealers & Distributors Info from Manufacturers & KC views (c) 2660 of 5.3.24 about SST on Distribution / Supply Chain Management Services & KCV (d) 2605 of 12.1.24 about FMCGs Supply Chain to issue ST Invoices Electronically

B. EXECUTIVE SUMMARY 

1. Your Entity Tax Team Development to take care of future expected Notices for 40% Budget increase:  Owing to matters in para A & C, for Tax, Levies, Corporate Compliance & Savings, we recommend your team members to attend the Courses considering their Education & Experience. These courses can be attended Physically at Karachi; Online from Karachi Lahore, Islamabad, etc and Recorded Lecture are also available. Click here for the Main Tax Flyer. Specific Level as per the following Courses, click Flyers and Tentative Registration Links. Please click on the Link for  (a)  Comparative Study to decide relevant Level by Mr Asif Kasbati FCA, FCMA, LLB and Courses Director (b) View of High Level Professionals view (c) Participants views 

2. Broadening Tax Base to Reduce your tax in future budgets:  Suggest Friends & Contacts to get Daily News Clipping, Updates & High Quality Commentary Subscriber in order to get this type of Quality emails, as per suggested by several High Level Professionals and current Subscribers.  For Flyer, click here. For video as  to the details about services, please click Link.  For Comments by High Level Professionals & Subscribers views, please click here. For 15 days FREE Samples as Trial, please fill Form, if not filled earlier. 

3. Multiplication: Although all the Commentaries are to the extent of the Subscribed IDs only, however, your Goodself is allowed to share this QC to Impart Knowledge to the maximum Employees

C. UPDATED COMMENTARY 

1. Further KQU 3734 of 9.1.25, being an important matter, we would inform you about Advance Tax on Supply Chain: A Tool for Broadening Tax Base in 2026 (Attachment 3421.1) in the ensuing paragraph, with emphasis in bold & Underline, ours for quick reading.

2. Pakistan’s supply chain — from manufacturers to retailers — plays a critical role in delivering goods to end consumers. However, for decades, large segments of this chain have remained outside the tax net, resulting in massive revenue leakages.

3. To counter this, the FBR has aggressively deployed advanced tax mechanisms under the Income Tax Ordinance, 2001. In Tax Year 2026, these provisions are being used as a key tool to document the economy and broaden the tax base.

4. Let’s understand how advanced tax works across the supply chain and what it means for businesses.

4.1 Why Advance Tax on Supply Chain?

Traditionally, distributors, wholesalers, and retailers:

• Operated without proper tax registration

• Underreported income

• Escaped income tax enforcement

Advance tax ensures that tax is collected upfront, even if the seller later underreports income.

4.2 Advance Tax on Sales to Distributors & Wholesalers (Section 236G)

Under Section 236 of the Income Tax Ordinance, 2001 (updated for TY 2026):

Who Collects the Tax?

• Manufacturers

• Commercial importers

From Whom?

• Distributors

• Dealers

• Wholesalers

When?

• At the time of sale

Key Benefit

The tax collected is adjustable and credited while computing annual income tax of the buyer.

4.3 Tax Rates Under Section 236G (ATL Persons)

4.4 Special Relief for Fertilizer Sector

If distributors, dealers, or wholesalers of fertilizers:

Appear on both ATL (Income Tax) and Sales Tax Active Taxpayers List,

Reduced rate applies: 0.25%

4.5 Advance Tax on Sales to Retailers (Section 236H)

To bring retailers into the tax net, Section 236H imposes advanced tax on retail sales.

Who Collects the Tax?

• Manufacturers

• Importers

• Distributors

• Dealers

• Wholesalers

From Whom?

• Retailers

• In some cases, wholesalers purchasing from distributors/dealers

Tax Rate (ATL)

0.5% on gross amount of sales

This tax is also adjustable against the retailer’s annual income tax liability.

5. Is Advance Tax Final or Adjustable?

Not a final tax

Advance tax collected under:

• Section 236

• Section 236G

• Section 236H

is fully adjustable while filing the income tax return for the relevant tax year.

6. What About Non-ATL Persons?

Important Note:

• The rates mentioned above apply only to ATL (Active Taxpayers List) people

• Non-ATL rates are significantly higher

• FBR uses higher rates as a penalty to force registration and filing

7. Businesses should verify ATL status before transactions to avoid excessive tax deductions.

How This Helps Broaden the Tax Base

Forces undocumented businesses into the system

Creates transaction trails across the supply chain

Encourages NTN registration and return filing

Reduces tax evasion at retail and wholesale levels

8. Advance tax has become one of FBR’s strongest enforcement tools in 2026.

Key Takeaways for Businesses

• Always maintain ATL status

• Keep withholding tax certificates

• Adjust advance tax in annual returns

• Ensure proper documentation across sales channels

Failing to comply increases the cost of doing business and invites audits.

9. Disclaimer

This article is for informational purposes only and does not constitute legal or tax advice. Tax rates and laws may change. Readers are advised to consult FBR notifications, the Income Tax Ordinance, 2001, or a qualified tax professional for case-specific guidance.

D. Further Details & Services

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.

Best regards for Here & Hereafter
Asif S Kasbati (FCA, FCMA & LLB)
Managing Partner 
Kasbati & Co (1400+ Tax, Levies, Companies, Economy, Inflation, HR, Banking, Finance, etc
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