ISLAMABAD: The Federal Board of Revenue (FBR) has the legal authority to order the disconnection of gas and electricity connections of certain Tier-1 retailers that fail to comply with mandatory sales tax registration and Point-of-Sale (POS) integration requirements under the Sales Tax Act, 1990, updated up to June 30, 2026.
Under the law, the FBR may issue a Sales Tax General Order (STGO) directing gas and electricity distribution companies to disconnect utility services of specified businesses, notwithstanding any other provision of the Sales Tax Act or any other law.
The provision applies to two categories of businesses: persons, including Tier-1 retailers, that have failed to obtain mandatory sales tax registration, and notified Tier-1 retailers that are registered but have not integrated their outlets with the FBR’s Computerised Point-of-Sale (POS) System.
The measure is intended to strengthen tax compliance by ensuring retailers fulfil their registration obligations and report sales transactions to the FBR in real time through the POS network.
The law also provides a mechanism for restoring utility services once a business becomes compliant. If an unregistered retailer completes sales tax registration, or a notified Tier-1 retailer successfully integrates its outlet with the FBR’s Computerised System, the Board may issue another Sales Tax General Order directing the relevant utility companies to restore the gas or electricity connection.
The mandatory POS integration programme enables the FBR to receive real-time sales data from large retailers, helping improve documentation of the economy, curb tax evasion and enhance sales tax collection.
In recent years, the FBR has expanded the use of digital monitoring and enforcement measures, with utility disconnections forming part of its legal framework to ensure compliance among large retailers. Tax experts say the provision reinforces the government’s efforts to improve transparency in the retail sector while encouraging businesses to comply with registration and digital reporting requirements.
