1. The Legal Framework

1.1 Section 236G — Advance tax on sales to distributors, dealers and wholesalers

Section 236G was inserted by the Finance Act, 2013. It requires every manufacturer or commercial importer to collect advance tax, at the time of sale, from distributors, dealers and wholesalers to whom the goods are sold. The tax is computed on the gross amount of the sale at the rate specified in Division XIV of Part IV of the First Schedule.

As originally enacted, the section applied only to specified sectors — electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint and foam (later extended by the Finance Act, 2022 to pharmaceuticals, poultry and animal feed, edible oil and ghee, auto-parts, tyres, varnishes, chemicals, cosmetics and IT equipment). The Finance Act, 2024 omitted the sectoral list altogether. From Tax Year 2025 (1st July 2024 to 30th June 2025) onwards, section 236G applies to sales of all goods by all manufacturers and commercial importers, irrespective of sector.

1.2 Section 236H — Advance tax on sales to retailers

Section 236H, inserted by the same Finance Act, 2013, sits one step further down the supply chain. It requires every manufacturer, distributor, dealer, wholesaler or commercial importer to collect advance tax, at the time of sale, from retailers — and every distributor or dealer to collect it on sales to another wholesaler. The rate is prescribed in Division XV of Part IV of the First Schedule, again applied to the gross amount of the sale.

The Finance Act, 2024 removed the sectoral restriction here as well, so section 236H now covers retail-channel sales of all goods across all sectors.

1.3 Nature of the tax: adjustable, not final

Both collections are advance tax, expressly adjustable in the hands of the person from whom collected. Under section 168, the distributor, dealer, wholesaler or retailer claims credit for the tax collected against the tax payable on taxable income for the tax year in which the collection was made. Where the credit exceeds the liability, the excess is refundable under section 170 (or, in practice, carried forward and adjusted). Neither section creates a final or minimum tax regime — the tax is a pre-payment, nothing more.

2. Who Collects, From Whom, and On What

Element	Section 236G	Section 236H
Withholding agent (collector)	Manufacturer or commercial importer	Manufacturer, distributor, dealer, wholesaler or commercial importer
Person taxed (payer)	Distributor, dealer, wholesaler	Retailer; and another wholesaler (when sold to by a distributor/dealer)
Timing	At the time of sale	At the time of sale
Tax base	Gross amount of sales (inclusive of sales tax and FED, as the section does not carve them out)	Gross amount of sales
Sectors covered	All sectors (Finance Act, 2024)	All sectors (Finance Act, 2024)
Regime	Adjustable advance tax	Adjustable advance tax

A point that trips people up: the classification depends on the capacity of the buyer, not the label on the invoice. A “dealer” buying from a manufacturer suffers 236G. The same dealer, when it sells onward to a retailer, becomes a collector under 236H. Most mid-chain traders are therefore simultaneously withholdees under one section and withholding agents under the other — which is precisely why the reconciliation in Part 5 below has two sides.

3. Current Rates — Tax Year 2027 (1st July 2026 to 30th June 2027)

The rates below were set by the Finance Act, 2024 (which fixed dedicated non-ATL rates for these sections instead of the general 100% enhancement under Rule 1 of the Tenth Schedule) and continue to apply. The Finance Act, 2025 and the Finance Act, 2026 left the rates in Divisions XIV and XV untouched.

Section / Supply	On ATL (Filer)	Not on ATL (Non-Filer)
236G — Sales to distributors, dealers, wholesalers (goods other than fertilizer)	0.1%	2%
236G — Sale of fertilizer, buyer on ATL under both the Income Tax Ordinance, 2001 and the Sales Tax Act, 1990	0.25%	—
236G — Sale of fertilizer, other cases	0.7%	1.4%
236H — Sales to retailers (and by distributor/dealer to another wholesaler)	0.5%	2.5%

References: Division XIV and Division XV of Part IV of the First Schedule; Tenth Schedule to the Income Tax Ordinance, 2001 (as amended by the Finance Act, 2024). ATL status is checked against the FBR Active Taxpayers List in force on the date of the transaction.

4. Worked Examples

Example 1 — Section 236G, filer vs non-filer distributor

A manufacturer of electrical cable in Lahore sells goods with a gross invoice value of Rs. 5,000,000 to a distributor.

Scenario	Rate	236G collected
Distributor on ATL	0.1%	Rs. 5,000
Distributor not on ATL	2%	Rs. 100,000

The manufacturer adds the tax to the invoice, deposits it against the distributor’s NTN/CNIC, and reports it in its withholding statement. The ATL distributor’s Rs. 5,000 becomes a tax credit in its return for the year. The non-filer’s Rs. 100,000 is likewise adjustable — but only if it files a return and claims it, which is the point of the mechanism.

Example 2 — Section 236H, sale to a retailer

The same distributor now sells stock worth Rs. 2,000,000 to a retail electric store.

Scenario	Rate	236H collected
Retailer on ATL	0.5%	Rs. 10,000
Retailer not on ATL	2.5%	Rs. 50,000

Here the distributor is the collector. It must deposit the Rs. 10,000 (or Rs. 50,000) with FBR within the prescribed time and report it. Failure to collect or deposit exposes the distributor itself to recovery under section 161 plus default surcharge under section 205 — the tax office recovers from the agent, then leaves the agent to chase the retailer.

Example 3 — The full chain, and why the cash-flow stacks

Consider a consignment moving importer → distributor → retailer, everyone on the ATL:

1. Commercial importer sells to distributor for Rs. 10,000,000. 236G @ 0.1% = Rs. 10,000 (credit of the distributor).
2. Distributor sells to retailer for Rs. 11,000,000. 236H @ 0.5% = Rs. 55,000 (credit of the retailer).
3. Retailer sells to consumers — no 236-series collection at the consumer stage.

Total advance tax parked in the chain: Rs. 65,000 on one consignment. Each participant claims its own credit against its own liability. Now run the same chain with a non-filer distributor and non-filer retailer: Rs. 200,000 + Rs. 275,000 = Rs. 475,000 on the identical goods. Same consignment, seven times the withholding. That gap is what “get on the ATL” actually means in rupees.

Example 4 — Fertilizer

A fertilizer manufacturer sells Rs. 20,000,000 of urea to a dealer:

• Dealer on ATL under both income tax and sales tax: 0.25% = Rs. 50,000.
• Dealer on income tax ATL only (not sales tax registered/active): 0.7% = Rs. 140,000.
• Dealer on neither: 1.4% = Rs. 280,000.

The fertilizer sub-rates are the only place in these two sections where sales tax ATL status changes the income tax rate — a deliberate lever to push fertilizer dealers into sales tax registration.

5. Reconciliation — Both Sides of the Ledger

This is where disputes are born and where refunds die. Reconciliation has to be done from two seats: as the withholding agent (you collected the tax) and as the withholdee (tax was collected from you).

5.1 The collector’s reconciliation (withholding agent)

A manufacturer, importer or distributor collecting under 236G/236H must be able to tie four records together, invoice by invoice:

1. Sales ledger — gross sales, split by buyer category (distributor/dealer/wholesaler vs retailer) and by buyer ATL status on the transaction date.
2. Tax collected register — 236G and 236H amounts per invoice, per buyer NTN/CNIC.
3. CPRs (Computerized Payment Receipts) — deposit of the tax under section 160 read with Rule 43 of the Income Tax Rules, 2002 (weekly deposit within seven days of the week ending on Sunday).
4. Withholding statements under section 165 — filed on IRIS for the prescribed periods, with each buyer’s particulars, gross amount and tax collected correctly captioned under the right section code (236G vs 236H — a surprisingly common misposting).

The reconciliation test the department applies in monitoring proceedings under section 161(1A) is blunt: declared sales × applicable rate = tax that should appear in the 165 statements and CPRs. Any shortfall is presumed a failure to collect. The agent then carries the burden of explaining the gap — exempt buyers holding certificates under section 159, sales to end-consumers rather than retailers, export sales, returns and discounts, or buyers whose ATL status justified the lower rate. If the explanation fails, the agent pays the tax it never collected, plus default surcharge under section 205 and penalty under section 182. We have defended enough 161/205 proceedings to say this plainly: the cases that survive are the ones where the buyer-wise, invoice-wise working existed before the notice arrived.

5.2 The claimant’s reconciliation (distributor / dealer / retailer)

On the other side, the person from whom tax was collected must reconcile before claiming credit in the return:

1. Pull the IRIS data. Tax collected against your NTN appears in IRIS under the taxpayer’s tax-deducted/collected data (MIS / Maloomat). This reflects what your suppliers reported — not necessarily what they collected.
2. Match against purchase records. Compare supplier invoices (which show the 236G/236H charged to you) with the IRIS data. Obtain the certificate of collection under section 164 and, ideally, CPR numbers from each major supplier.
3. Investigate mismatches. The usual culprits: the supplier deducted but filed the 165 statement late or not at all; the supplier reported against the wrong NTN or CNIC; the amount was captioned under the wrong section; or the supplier charged the non-ATL rate on a date when you were actually on the ATL.
4. Claim only what you can evidence. Credit under section 168 is claimable where tax was in fact collected; but in assessment and refund proceedings, credit not visible in FBR’s own data will be questioned, and the section 164 certificate plus supplier CPRs become your proof.

5.3 A worked reconciliation

M/s ABC Traders, a distributor on the ATL, has the following for Tax Year 2027 (1st July 2026 to 30th June 2027):

Item	Amount (Rs.)
Purchases from manufacturers (gross)	120,000,000
236G suffered per supplier invoices (0.1%)	120,000
236G visible in IRIS against ABC’s NTN	95,000
Unreconciled gap	25,000

Investigation shows one supplier reported Rs. 25,000 against ABC’s old CNIC-based registration instead of its NTN. ABC obtains the section 164 certificate and CPR copies, has the supplier revise its 165 statement, and only then files its return claiming the full Rs. 120,000. Had it claimed the full amount against 95,000 of visible data with no paper trail, the excess would likely have been disallowed in any subsequent scrutiny — or stalled its refund indefinitely.

5.4 Turnover work-back — how FBR uses your own withholding against you

Reconciliation now cuts the other way too. Because 236G/236H is collected at a known percentage of gross sales, the department can reverse-engineer turnover from the withholding data. If Rs. 500,000 of 236H was collected from a retailer at 0.5%, FBR’s systems infer purchases of Rs. 100,000,000 — and compare that with the turnover declared in the return. A material gap invites amendment proceedings under section 122, with the withholding data as the “definite information.”

The Finance Act, 2026 has formalised this logic in sales tax as well: a retailer is now classifiable as a Tier-1 retailer under the Sales Tax Act, 1990 where turnover exceeds Rs. 200 million — whether declared, or worked back from the tax withheld under sections 236G and 236H during the preceding twelve months (with the Board empowered to exclude persons or classes by notification). In other words, the income tax withheld on your purchases can, by itself, drag you into Tier-1 status with its integration and e-invoicing obligations. Retailers who assumed 236H was a quiet, adjustable levy should re-read their purchase volumes with this in mind.

6. Compliance Checklist

If you collect (manufacturer / importer / distributor / wholesaler)

• Verify each buyer’s ATL status on the date of sale (and, for fertilizer, sales tax ATL status too); keep dated screenshots or system logs.
• Caption collections correctly — 236G for distributor/dealer/wholesaler buyers, 236H for retailer buyers.
• Deposit weekly under section 160 / Rule 43; retain CPRs mapped to invoices.
• File section 165 statements within time, complete with buyer NTN/CNIC — penalty under section 182 applies per statement for default.
• Maintain a standing sales-to-withholding reconciliation so a 161(1A) notice can be answered from existing workings.

If tax is collected from you (distributor / dealer / wholesaler / retailer)

• Stay on the ATL — file the return by the due date every year; the rate differential is the single largest controllable cost in this regime.
• Collect section 164 certificates and CPR references from major suppliers each quarter, not at year-end.
• Reconcile supplier invoices against IRIS-visible credits before filing; chase mispostings while suppliers can still revise statements.
• Run the turnover work-back against your own declared sales and document any divergence.
• If credits routinely exceed liability, plan the refund file under section 170 with complete evidence from day one.

7. Frequently Asked Questions

Is 236G/236H a final tax?
No. Both are adjustable advance taxes. Credit is claimed under section 168 against the tax payable for the year of collection, and any excess is refundable under section 170.

My sector was never in the original list — does it still apply to me?
Yes. The Finance Act, 2024 removed the sectoral list from both sections. All goods, all sectors, from Tax Year 2025 (1st July 2024 to 30th June 2025) onwards.

The supplier deducted the non-filer rate but I am a filer. What now?
ATL status is tested on the transaction date. If you were on the ATL that day, the excess collection is still your adjustable credit — claim the full amount actually collected, supported by the section 164 certificate. Going forward, provide your NTN and ATL evidence to the supplier before dispatch, because recovering cash-flow through a refund is far slower than never suffering the higher rate.

Can I get an exemption certificate against 236G/236H?
Only within the narrow room section 159 leaves. The Finance Act, 2024 curtailed exemption-certificate facilities generally, and for ordinary taxable traders there is no exemption route — the rate concession comes from ATL status, not certificates. Persons with genuinely exempt income should have their position examined case by case.

What happens if a collector fails to collect?
The department recovers the tax from the withholding agent under section 161, with default surcharge under section 205 and penalty exposure under section 182 — regardless of whether the buyer later paid its own tax, unless the agent can prove the tax was paid by the withholdee (section 161(1B) relief), which itself requires evidence from the very reconciliation described above.

8. Conclusion

Sections 236G and 236H are no longer a sector-specific footnote. After the Finance Act, 2024, they apply to the entire goods supply chain; after the Finance Act, 2026, the withholding data doubles as a turnover-detection tool feeding both income tax amendment proceedings and Tier-1 retailer classification. For filers the tax is a manageable cash-flow item — provided the credits are reconciled and evidenced. For non-filers it is a 2–2.5% levy on gross sales with no practical escape except entering the tax net. Either way, the businesses that come out of this regime unscathed are the ones whose invoice-level records, CPRs, section 164 certificates and IRIS data all tell the same story.

Disclaimer: This article is for general information only and reflects the law as amended up to the Finance Act, 2026. It is not legal advice. Rates and procedures may change through subsequent legislation, SROs or circulars. For advice on your specific facts, consult a qualified tax practitioner.