Govt May Give 3-Month Breather to 1.2 Million Shopkeepers as Fixed Tax Scheme Flops

Pakistan's administration is considering giving almost 1.2 million shopkeepers another three months to join its fixed tax scheme, potentially delaying enforcement action that could expose noncompliant traders to penalties of up to Rs.

Key points

• While another 772, 000 are unregistered businesses, of the almost 1.2 million shopkeepers identified, approximately 390, 000 are registered retailers who failed to file returns.
• Tax authorities have presented Finance Minister Muhammad Aurangzeb with two options: extend the deadline until January 31, 2027, with a maximum surcharge of Rs.
• You Can Now Cancel Old Sales Tax Invoices On Main FBR Website.
• Under one proposal, the administration would allow eligible retailers to file returns until January 31, 2027, under a revised surcharge structure.
• Tax authorities believe the administration could grant a general extension to small retailers under Section 214A of the Income Tax Ordinance.

Tax authorities have presented Finance Minister Muhammad Aurangzeb with two options: extend the deadline until January 31, 2027, with a maximum surcharge of Rs. 85, 000, or proceed against traders under the regular income tax law. It carries higher penalties and extra compliance requirements.

For context, the second option would expose shopkeepers to a minimum penalty of Rs. 175, 000, feasible tax audits and mandatory disclosure of their assets. The administration has yet to produce a final decision on the proposed extension. FBR Sets New Property Rates for Islamabad Rural Areas and Abbottabad. Only 222 Traders Joined the Scheme.

For context, the administration introduced a fixed tax scheme offering retailers a tax rate of 1 percent on total sales in exchange for exemptions from tax audits and permission to conduct cash transactions. Authorities had projected at least 1 million retailers to join the scheme this year, generating a minimum of Rs. 50 billion in income tax revenue.

Nevertheless, only 222 further traders filed returns and paid taxes by the October 31 deadline, generating a negligible amount. The scheme was initially aimed at bringing retailers into the tax system from an estimated pool of 3.8 million nonfilers.

According to tax authorities, almost 1.5 million retailers fall within the scheme's scope. While almost 1.2 million digitally identified shopkeepers did not join the new scheme or file returns under the existing tax law, around 290, 000 were already part of the tax system.

You Can Now Cancel Old Sales Tax Invoices On Main FBR Website. Administration Weighs Lower Penalties.

While another 772, 000 are unregistered businesses, of the almost 1.2 million shopkeepers identified, approximately 390, 000 are registered retailers who failed to file returns. Authorities have additionally physically verified around 6, 000 shopkeepers, making them potential targets for the first round of enforcement notices.

Under one proposal, the administration would allow eligible retailers to file returns until January 31, 2027, under a revised surcharge structure. Shopkeepers filing by the end of November would pay Rs. 10, 000, rising to Rs. 35, 000 by the end of December and Rs. 85, 000 by the end of January.

Meanwhile, the proposal draws on Rule 10. It provides for penalties of Rs. 10, 000 for the first default, Rs. 25, 000 for the second and Rs. 50, 000 for the third, with at least one month between successive enforcement proceedings. Nevertheless, the proposed arrangement raises questions concerning whether retailers would receive preferential treatment compared with other taxpayers. This person face a Rs. 25, 000 penalty for late filing. New EV Policy Under Enormous Pressure. Legal Questions Delay Enforcement.

Tax authorities believe the administration could grant a general extension to small retailers under Section 214A of the Income Tax Ordinance. The provision allows the Federal Board of Revenue to extend deadlines for applications and other compliance requirements, including after the original deadline has expired. The aggregate extension granted by the Board or commissioner cannot exceed two years.

Earlier this week, Minister of State for Finance and Revenue Bilal Azhar Kayani informed the National Assembly Standing Committee on Finance that the administration would seek the attorney general's opinion before initiating enforcement proceedings. He maintained that no further extension had been approved after the October 31 deadline.

For context, the scheme has struggled to attract retailers despite exemptions from tax audits, restrictions on proceedings based on third party information and the absence of mandatory sales tax point of sale systems or digital invoicing requirements. While its chairman, Syed Naveed Qamar, pressed authorities on whether Prime Minister Shehbaz Sharif and the federal cabinet backed punitive action despite threats of a traders' strike, the parliamentary committee expressed disappointment over the poor participation. Stay Connected with ProPakistani.

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Taken together, the developments around govt May Give 3-Month Breather to 1.2 Million Shopkeepers as Fixed Tax point to a situation that is still moving, and the coming days should bring more clarity.