What changed at PRA in 2026: rates, bank deductions, penalties and the active taxpayer list

Answer first. From 1 July 2026, Punjab restaurants and hotels charge 8% when the customer pays by card, mobile wallet or QR. Cash and other payments are taxed at 16%. Many other services moved from 5% to 8%. Since a notification of 2 July 2026, banks deduct the tax from digital payments for listed services before the money reaches you. Failing to issue a tax invoice now costs Rs 500,000 for a first default and Rs 1 million after that. And a business that misses two returns in a row drops off the active taxpayer list. Its customers then cannot claim input tax on its invoices. The E-IMS thresholds have not changed: Rs 6 million turnover for restaurants and Rs 10 million for other services.

The short version

Rates from 1 July 2026

The Punjab Finance Act 2026 raised the reduced rate on a long list of services from 5% to 8%, without input tax adjustment. The standard rate of 16% is unchanged.

• Restaurants, cafés and food outlets: 8% where payment is by debit or credit card, mobile wallet or QR, 16% otherwise. The card rate was 5%.
• Hotels, motels and guest houses: the same 8% and 16% split. The old 5% rate for small hotels with fewer than 20 rooms that were not part of a chain or franchise is gone.
• Moved from 5% to 8%: marriage halls, lawns and catering; tour operators and travel agents; property dealers; architects, town planners and landscape designers; rent-a-car; health care, gyms and fitness centres; laundries and dry cleaners; warehouses and cold storage; rental of construction machinery; and accountants, auditors and tax consultants for accountancy, audit, tax and corporate law work.
• Still at 5%: beauty parlours and salons, fashion designers, skin and laser clinics, and cable TV operators, among others.
• Newly taxable: foreign exchange dealers lost their exemption.

Rates depend on the exact entry in the Second Schedule, so check yours before you change a price list. The rate on a restaurant bill is one of the few things a customer will notice.

Banks now collect the tax

Notification No. PRA/Member Legal/816/26, dated 2 July 2026, turns banks into tax collectors. Every scheduled bank, acquiring bank, payment system operator and anyone else who settles card, QR, wallet or internet banking payments is now a collecting agent for listed services. In practice:

• The bank deducts the tax from the gross digital payment. That amount is not credited to the merchant’s account.
• The rate is 8% for restaurants, hotels, marriage halls, caterers, event managers, travel agents, rent-a-car, health care and gyms, and other listed services. It is 5% for beauty parlours, salons and fashion designers.
• The bank deposits the tax by the 10th of the following month, and files a statement showing, for each merchant ID, the gross value settled and the tax collected.
• Each merchant gets a monthly certificate of the tax collected and deposited on their behalf.

Some things are not clear from the notification itself. It states no start date. It does not say how a merchant should show the deducted tax in its own return, or how this fits with its E-IMS invoices. Until PRA says more, do three things: collect the monthly certificate from your bank, match your card settlements to your E-IMS invoices each month, and ask your tax adviser how to show the deducted tax in your return.

QR payments and delivery apps

QR payments. PRA Circular No. 1 of 2026, dated 23 January 2026, covers restaurants, hotels and beauty parlours. It required them to open a QR-enabled bank account within 14 days, keep QR payment working, and show the QR code clearly on the premises.

Delivery apps. Notification No. PRA.32-24/2026/1313, dated 19 February 2026, makes food delivery apps collect the tax on the restaurant orders they handle. If you sell through delivery apps, check how the platform shows the tax it collected for you, and match it to your own records.

E-IMS penalties

Three entries in section 48(2) of the Punjab Act matter most for invoicing. The figures below are from the Act as amended to 2026.

The entry 15 range was set by the Punjab Finance Act 2025. Entries 16 and 17 were raised by the Punjab Finance Act 2026. Handwritten receipts, kitchen order slips and pre-bills given to customers instead of E-IMS receipts are what the August 2026 drive went after.

Inspection powers also widened. Since a PRA notification of 9 February 2026, every officer at or above Enforcement Officer or Audit Officer can use section 56 powers. That means entering premises and inspecting records in their area.

The active taxpayer list

The Punjab Finance Act 2026 rewrote what an active taxpayer is, and gave the list consequences that reach your customers.

• Who drops off. A registered person is not active if their registration is suspended or blacklisted, or if they missed the return for the last two tax periods in a row.
• Your buyers lose input tax. New clause (ff) of section 16B bars input tax on purchases from anyone not on PRA’s or FBR’s active taxpayer list. It also bars input tax on invoices from anyone suspended by PRA, FBR or another province.
• Licences and contracts. Under a new section 76A, PRA can tell licensing bodies to refuse licences, permissions and NOCs for a taxable service unless the applicant is registered and active. It can also tell government buyers not to award or renew service contracts to anyone who is not. A newly established business is exempt for six months from registration.

For a caterer, event manager or consultancy that sells to other businesses, two missed returns can now cost customers. Expect business buyers to start checking your status before they pay you.

Input tax limits

• The cap on input tax adjustment fell from 90% to 80% of output tax for the tax period.
• Input tax on capital goods, machinery and fixed assets is now adjusted in twelve equal monthly instalments.
• PRA can run a risk-based evaluation system for input tax claims, with a risk register of taxpayers, suppliers and transactions.

Enforcement on the ground

These items come from press reports rather than PRA documents.

• In August 2026 PRA announced a zero-tolerance enforcement drive, with hotels and restaurants told to show visible QR codes so customers can check receipts.
• Reports from 10 August described handwritten receipts as banned at restaurants and marriage halls, with fines of up to Rs 1 million.
• On 23 September, restaurants in Lahore, Faisalabad, Sargodha and Multan were reported fined for fake receipts and for tax collected but not recorded.
• PRA’s Sahulat app lets customers scan a receipt’s QR code to check it is genuine and report fakes.

Some of the same reports said E-IMS now applies to outlets with monthly sales of Rs 500,000. That does not match PRA’s rules, which still set the thresholds at Rs 6 million turnover for restaurants and Rs 10 million for other services.

What to do now

1. Check your rate. Find your entry in the Second Schedule and update prices and POS settings for card and cash.
2. Issue every receipt through E-IMS. No handwritten bills, kitchen slips or pre-bills to customers.
3. Collect your bank certificates. Match the tax deducted on card payments to your E-IMS invoices every month.
4. Never miss two returns. Your customers’ input tax and your licences now depend on it.
5. Check your own suppliers. Input tax on invoices from non-active suppliers is not admissible.
6. Keep FBR separate. If you also sell goods, FBR digital invoicing applies too. Our post on FBR and PRA together explains the split.

FAQs

What is the PRA sales tax rate on restaurant card payments in 2026? 8% without input tax adjustment where the customer pays by debit or credit card, mobile wallet or QR, and 16% otherwise, from 1 July 2026 under the Punjab Finance Act 2026. The card rate was 5% before that.

Do banks now deduct PRA tax from card payments? Yes, for listed services. Notification No. PRA/Member Legal/816/26 of 2 July 2026 makes banks and payment companies collecting agents. They deduct the tax from the gross digital payment, deposit it by the 10th of the next month and give each merchant a monthly certificate.

What is the PRA penalty for not issuing a tax invoice? Rs 500,000 for a first default and Rs 1 million for each later default, with the premises liable to be sealed for up to a month after three defaults. Issuing invoices that bypass E-IMS separately carries Rs 400,000 to Rs 1,000,000.

How do you drop off PRA’s active taxpayer list? By having your registration suspended or blacklisted, or by missing the return for the last two tax periods in a row. Buyers then cannot claim input tax on your invoices.

Did the E-IMS turnover threshold change in 2026? No. E-IMS applies to restaurants with turnover of Rs 6 million or more and to other services at Rs 10 million or more. Press reports of a Rs 500,000 monthly threshold do not match PRA’s rules.

Related reading: the PRA E-IMS guide, eInvoicePro for PRA E-IMS and FBR and PRA together.