Federal Government Introduces Fixed Tax Scheme for Small Traders

The federal government on Friday introduced a fixed tax scheme for small shop owners as part of its ongoing efforts to expand tax collection and document the economy.

Aurangzeb and Kayani Jointly Announce the Scheme

Finance Minister Muhammad Aurangzeb announced the scheme during a joint press conference with State Minister for Finance Bilal Azhar Kayani, outlining its key features and objectives. Aurangzeb said that economic stability must be maintained and that increasing the country’s revenue to a specific level remained a priority.

“Everyone says that instead of increasing tax rates at this time, there is a need to reduce them,” the finance minister said.

According to Aurangzeb, an estimated three to four million small traders fall within this category. He welcomed the participation of traders who had not previously contributed to the tax net, saying they were now coming forward voluntarily. He added that the scheme was being introduced “in line with consultations and demands from small traders.”

Key Features of the Fixed Tax Scheme

Speaking at the press conference, Kayani said the simplified scheme would apply to shopkeepers whose annual sales do not exceed Rs 200 million, with the government introducing the fixed tax framework to make it easier for small traders to fulfil their tax obligations.

“This is a one-page form on which traders will record the sale of their goods,” Kayani said.

The scheme carries a fixed tax rate of 1%, while any withholding tax already deducted will be adjusted against it. Eligible retailers must submit a simple one-page declaration form, available in Urdu, Pashto, Sindhi, and Balochi languages. Participants are required to deposit a minimum of Rs 25,000 at the time of filing, irrespective of withholding tax already deducted. Businesses with higher turnover would pay tax at 1% according to their sales volume.

Both filers and non-filers can join the scheme by submitting the required form. The scheme is optional — shopkeepers may choose either the new fixed tax regime or remain under the normal taxation system.

Audit Exemptions and FBR Plate for Enrolled Traders

Participants in the scheme will generally be exempt from tax audits. In exceptional cases where an audit becomes necessary, it would “only be conducted after consultation with, or intimation to, a notified committee comprising representatives of traders’ organisations.” Every enrolled trader will receive an FBR-issued plate displaying their name, shop name, and taxpayer status. Traders participating in the scheme will also be exempt from FBR’s point of sale (POS) requirement.

Penalties for Non-Compliance

Shopkeepers who neither join the fixed tax scheme nor file returns under the normal tax regime will face escalating penalties — Rs 10,000 in the first month, Rs 25,000 in the second month, and Rs 50,000 in the third month. Street vendors and pushcart operators remain exempted from the scheme entirely. Traders seeking to benefit must also ensure their tax payment is at least equal to the previous year’s amount.