The Federal Board of Revenue (FBR) has proposed a simplified, voluntary tax scheme allowing small shopkeepers with annual turnover of up to Rs200 million to pay income tax at one per cent of gross turnover, exempting them from routine audits, withholding tax obligations and mandatory digital invoicing.
The draft Special Procedure for Small Shopkeepers was issued on Tuesday and will be finalised within one week, pending objections and suggestions from the public.
Retailers opting into the scheme will pay a minimum cash tax of Rs25,000 even if tax already deducted at source exceeds their liability, with any excess withholding tax treated as non-refundable.
Participation remains optional, and eligible shopkeepers may choose between the simplified regime and continued filing under the existing normal taxation system.
Registration will be available through the IRIS portal of the FBR, a dedicated mobile application, or at tax offices.
The scheme 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.
Retailers who filed returns for 2025 may join only if their declared liability is not lower than in the previous year and their business has not been split or renamed to meet eligibility criteria.
Participants will generally remain outside the routine audit framework. Departmental proceedings may be initiated only after consultation with trade association representatives, and only where tax authorities obtain third party information concerning significant economic transactions, ownership of expensive assets, or misuse of the scheme for tax avoidance.
Retailers under the scheme will also be exempt from withholding tax obligations on purchases under Section 153 of the Income Tax Ordinance, along with the minimum tax provisions of Section 113 and the 1.25 per cent minimum tax applicable under the normal regime. No point of sale systems or digital invoicing infrastructure will be required.
The draft procedure includes a simplified return requiring disclosure of annual sales, purchases, business expenses, net profit, other income and assets. The form will be accessible via the IRIS portal and mobile application in Urdu and regional languages.
Qualifying retailers will be issued a Green Plate bearing a QR code, the name of the taxpayer, National Tax Number and business address. Under the draft, FBR officials will not enter the premises of bona fide retailers displaying the plate for tax-related matters.
Non-compliance will draw escalating penalties. Retailers who neither file a regular return nor opt into the simplified regime by the due date will face a penalty of Rs10,000 for a first default, Rs25,000 for a second, and Rs50,000 for a third, with at least one month required between successive proceedings.
