The government has postponed its decision to take action against approximately 1.2 million non-filer shopkeepers who failed to join the new fixed tax scheme, while a proposal to grant them an additional three months is also under consideration.
According to sources, tax authorities presented two proposals to Finance Minister Muhammad Aurangzeb earlier this week.
Under the first proposal, traders would be given until January 31, 2027, to submit their tax returns. However, those filing late would have to pay a maximum surcharge of Rs85,000, which is Rs90,000 less than the penalty imposed under the regular tax system.
The second proposal recommends taking action against traders under existing income tax laws, which could result in a minimum penalty of Rs175,000, tax audits, and mandatory disclosure of complete asset details.
Minister of State for Finance and Revenue Bilal Azhar Kayani informed the National Assembly Standing Committee on Finance that the government would seek legal advice from the Attorney General before taking any action. However, he clarified that the scheme would not be extended further.
Fixed tax scheme fails to attract traders
The government had introduced a fixed tax scheme for traders under which shopkeepers were required to pay just 1% tax on their total sales. The scheme also offered exemptions from tax audits and permitted cash transactions.
The government had expected at least one million of the country’s 3.8 million non-filer traders to join the scheme, generating approximately Rs50 billion in tax revenue.
However, the response was extremely disappointing, as only 222 new traders submitted their tax returns by the October 31 deadline.
According to sources, tax authorities have identified approximately 1.5 million shopkeepers who fall within the scope of the scheme.
Of these, only 290,000 were already registered in the tax system, while the remaining traders did not take advantage of the scheme.
Proposed Penalties for Late Filers
Under the proposed arrangement, traders could be allowed to submit their tax returns by paying different surcharges depending on when they file.
Those submitting their returns by the end of November would have to pay Rs10,000, while the surcharge would increase to Rs35,000 by the end of December.
Traders filing their returns by January 31, 2027, would be required to pay a maximum surcharge of Rs85,000.
Tax authorities maintain that Section 214A of the Income Tax Ordinance allows the government to provide general relief to small shopkeepers.
However, legal concerns have emerged over whether granting such concessions to traders would constitute discriminatory treatment against other taxpayers.
National assembly committee expresses disappointment
The National Assembly Standing Committee on Finance also expressed disappointment over the failure of the fixed tax scheme.
Committee Chairman Naveed Qamar questioned the position of Prime Minister Shehbaz Sharif and the federal cabinet regarding action against non-compliant traders.
He asked whether the government was prepared to impose penalties and initiate legal proceedings against traders despite their threats to go on strike.
