ISLAMABAD – Pakistan’s government introduced new fixed-tax scheme for small retailers, placing 1% tax on annual sales up to Rs200 million. Aimed at expanding the tax base, the policy targets millions of shopkeepers while offering simplified compliance and incentives like audit exemptions for those who opt in, with penalties for those who stay outside the system.
Finance Minister Aurangzeb announced on Friday that retailers with annual sales of up to Rs200 million will now fall under a simplified tax structure, under which a flat 1% tax on total yearly turnover will be applied.
Officials termed policy as key step toward “greater transparency” and a more “sustainable tax system.” He acknowledged longstanding concerns that the current tax burden has disproportionately affected salaried individuals and the documented corporate sector, signaling a broader push to rebalance the system through expansion rather than heavier taxation on existing taxpayers.
According to official estimates, the new framework is expected to bring 3 to 4 million small shopkeepers into a more structured tax regime, marking one of the largest attempts to date to formalize Pakistan’s vast retail sector. Aurangzeb also stressed that despite ongoing geopolitical tensions in the Middle East, Pakistan’s economy has remained stable, claiming the country has managed its challenges through domestic resources without external financial assistance.
Minister of State Bilal Azhar Kayani explained that the scheme applies to all retailers with turnover up to Rs200 million annually. Under the arrangement, a 1% tax on total sales will be charged, while any already deducted withholding tax will be adjusted against the liability. However, even under the scheme, retailers must pay a minimum of Rs25,000 at the time of filing.
The scheme is optional, but officials say it comes with major incentives. Retailers who opt in will be exempt from FBR’s point-of-sale system requirements and will also be spared from routine audits, benefits expected to encourage widespread participation from both filers and non-filers.
However, authorities warned that retailers who neither join the new scheme nor comply with the regular tax regime will face penalties under the law. Street cart vendors, meanwhile, have been explicitly excluded from the new taxation framework.
Officials added that the policy was developed after extensive consultations with trade associations, signaling an attempt to balance enforcement with business community concerns.
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