Finance Minister Muhammad Aurangzeb has said the FBR retailer tax scheme, a fixed-tax procedure for small retailers, will continue beyond 2026, describing it as a long-term route to bring small shopkeepers into the formal tax system.
The minister’s remarks, reported by TechJuice, come as the scheme struggles to gain traction. The Federal Board of Revenue recently told the International Monetary Fund that only 1,016 returns have been filed under the scheme so far, collecting Rs86 million against an annual target of Rs50 billion. Of those returns, just 91 came from fresh filers.
How the FBR retailer tax scheme works
The scheme, notified under SRO 1109(I)/2026 and formally called the Special Procedure for Small Shopkeepers, lets eligible retailers pay income tax at a fixed rate of one percent of gross turnover. It is optional: shopkeepers can choose between the special procedure and a regular income tax return.
It applies to retailers with annual turnover of up to Rs200 million. Those who join pay a minimum of Rs25,000 with their return, after adjusting any withholding tax already deducted. In return, they are exempt from the FBR’s point-of-sale requirement and are generally not subject to audit.
Registration is through the IRIS web portal, the Shopkeepers Mobile Application, or the nearest tax office, and shop entry rules for traders have separately been eased.
Who is left out
The procedure is limited to single-shop owners. It excludes retailers whose turnover exceeded Rs200 million in any of the past three years, owners of more than one shop, Tier-I retailers, jewellers, and professionals such as doctors, engineers and lawyers. Anti-abuse rules also bar retailers whose tax bill under the scheme would be lower than what they paid in 2025, and businesses split or renamed to qualify.
Street cart vendors are fully exempt.
The uptake problem
The FBR had aimed to enrol about 100,000 retailers in the first phase, out of an estimated three to four million small shopkeepers nationwide, at a time when the FBR faces an overall tax shortfall of Rs649 billion. The filing deadline has been extended to October 15, 2026 — the FBR has given all taxpayers more time to file returns this year — but eligible retailers who stay out of both the fixed scheme and the normal regime face escalating penalties of Rs10,000 to Rs50,000, as the government moves to map shops and punish traders skipping the fixed tax scheme.
The weak response surfaced during talks tied to the fourth review of Pakistan’s $7 billion IMF Extended Fund Facility — Pakistan and the Fund have separately reached a staff-level deal for $1.2 billion — where the IMF mission asked about progress on the scheme.
Frequently asked questions
What is the FBR retailer tax scheme?
An optional fixed tax procedure letting small shopkeepers with turnover up to Rs200 million pay one percent of gross turnover, with a minimum of Rs25,000, in exchange for exemption from POS requirements and routine audits.
Will the scheme continue after 2026?
Finance Minister Muhammad Aurangzeb says it will continue beyond 2026 as a long-term route for small retailers into the formal tax system.
How many retailers have joined so far?
The FBR told the IMF that 1,016 returns have been filed, collecting Rs86 million against a Rs50 billion annual target, with only 91 fresh filers.
