Key Takeaways
- The Federal Board of Revenue (FBR) has introduced a new tax regime for small shopkeepers.
- Individual retailers with an annual turnover up to Rs200 million can opt for one percent of their gross turnover as income tax.
- Participants will be exempt from routine audit and withholding tax obligations.
The Federal Board of Revenue (FBR) has announced a simplified and voluntary income tax regime aimed at small shopkeepers, in an effort to broaden Pakistan’s narrow tax base. The new scheme, known as the Special Procedure for Small Shopkeepers, was notified through Income Tax SRO 1166 on Tuesday.
Under this plan, individual retailers with an annual turnover of up to Rs200 million will have the option to pay income tax equivalent to one percent of their gross turnover instead of filing returns under the normal taxation regime. However, they must still pay a minimum cash tax of Rs25,000 even if taxes already deducted at source exceed their liability.
The scheme is designed to be optional, allowing eligible shopkeepers to either join the simplified regime or continue filing regular income tax returns as per existing laws. Registration can be done through the FBR’s IRIS portal, a dedicated mobile application, or at tax offices. The procedure excludes retailers whose turnover exceeded Rs200 million 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.
To encourage participation, the FBR has decided that retailers opting for this scheme will generally remain outside the routine audit framework. Departmental proceedings can only be initiated after consultation with representatives of trade associations and 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 in the new regime 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 percent minimum tax applicable under the normal regime will not apply to them.
The FBR issued a draft procedure earlier this month, seeking objections and suggestions from the public on July 14th. This move is part of a broader strategy to simplify the tax process for small businesses and encourage greater compliance among shopkeepers across Pakistan.
