FBR Launches Draft Tax Scheme Offering Small Shopkeepers Audit Exemptions

The Federal Board of Revenue released a draft Special Procedure for Small Shopkeepers, opening a period for public objections and suggestions before finalisation.

Key Elements of the Proposed Regime

Individual retailers with annual turnover up to a specified amount may pay income tax equal to a percentage of gross turnover rather than filing under the normal regime. Participants must still pay a minimum cash tax even when taxes deducted at source already exceed that amount, and any excess withholding tax will not be refunded. The scheme exempts participants from routine audit and mandatory digital invoicing requirements.

Eligibility Rules and Exclusions

The procedure applies only to single-shop operators whose turnover has not exceeded a specified limit in any of the preceding three years. It excludes owners of more than one shop, certain retailers, jewellers and professionals including doctors, engineers and lawyers. Retailers who filed returns for a prior year may join only if their new liability is not lower than the prior year and they have not split or renamed businesses to qualify. Registration options include the FBR's IRIS portal, a dedicated mobile application or tax offices.

Next Steps for Karachi Retailers

The scheme remains entirely optional, so eligible shopkeepers in Karachi can choose the simplified route or continue with regular income tax returns under existing law. To encourage participation, the FBR has proposed that retailers opting in would generally stay outside the routine audit framework, with departmental proceedings possible only after consultation with trade associations and only on receipt of third-party information about significant economic transactions, ownership of expensive assets or scheme misuse. Participants would also gain exemption from withholding tax obligations on purchases. The draft will be finalised after the public consultation period closes.