ISLAMABAD(National Times)- The Federal Board of Revenue (FBR) has proposed a simplified and voluntary income tax regime for small shopkeepers, offering exemption from routine audit, withholding tax obligations and mandatory digital invoicing in a fresh attempt to broaden the country’s narrow tax base.
The draft Special Procedure for Small Shopkeepers, issued on Tuesday, will be finalised within one week after objections and suggestions from the public.
Under the proposal, individual retailers with an annual turnover of up to Rs200 million will have the option of paying income tax equal to one per cent of their gross turnover instead of filing returns under the normal taxation regime.
However, participating retailers will have to pay a minimum cash tax of Rs25,000 even if taxes already deducted at source exceed their liability. Any excess withholding tax will not be refundable.
The scheme will remain optional, allowing eligible shopkeepers either to join the simplified regime or continue filing regular income tax returns under the existing law.
Registration will be available through the FBR’s IRIS portal, a dedicated mobile application, or at tax offices.
The proposed procedure excludes retailers whose turnover exceeded Rs200m in any of the preceding three years, owners of more than one shop, tier I retailers, jewellers and professionals such as doctors, engineers and lawyers.
Retailers who filed tax returns for 2025 may opt into the scheme only if their liability is not lower than the previous year and they have not split or renamed their businesses to qualify.
To encourage participation, the FBR has proposed that retailers opting for the scheme would generally remain outside the routine audit framework.
Consultation before legal action
Departmental proceedings could only be initiated after consultation with representatives of trade associations and only where the tax authorities receive third party information relating to significant economic transactions, ownership of expensive assets or misuse of the scheme for tax avoidance.
Moreover, participants will also be exempt from withholding tax obligations on purchases under Section 153 of the Income Tax Ordinance. The provisions relating to minimum tax under Section 113 and the 1.25 per cent minimum tax applicable under the normal regime will also not apply.
Eligible retailers will not be required to install point of sale systems or digital invoicing infrastructure.
The draft procedure proposes a simplified tax return requiring shopkeepers to declare annual sales, purchases, business expenses, net profit, other income and assets. The form will be available through the IRIS portal and mobile application in Urdu and regional languages.
To encourage compliance, the FBR plans to issue qualifying retailers a “Green Plate” carrying a QR code, the taxpayer’s name, National Tax Number and business address.
According to the draft, FBR officials would not enter the premises of bona fide retailers displaying the plate for tax-related matters.
The proposal also introduces escalating penalties for non-compliance. Retailers who neither file a regular return nor opt for the simplified regime by the due date would face a penalty of Rs10,000 for the first default, Rs25,000 for the second and Rs50,000 for the third, with at least one month between successive proceedings.
