The Federal Board of Revenue on Monday notified the Special Procedure for Small Shopkeepers for Tax Year 2026, unveiling a voluntary fixed-tax regime that seeks to pull the country’s vast and largely undocumented retail sector into the formal economy with the lure of minimal paperwork, audit immunity, and a government-issued compliance badge.
Under the scheme, individuals earning income exclusively from a single retail shop with an annual turnover of up to Rs200 million can opt to pay one percent of their gross turnover as tax. The procedure, however, draws a firm line around eligibility: it will not apply to anyone whose turnover breached the Rs200 million mark in any of the preceding three tax years, owners of more than one shop, Tier-I retailers, jewellers, or professionals such as doctors, engineers, and lawyers.
Registration has been designed with accessibility in mind. Shopkeepers can sign up through the IRIS web portal, a dedicated mobile application, or by walking into their nearest tax office. Those who choose to stay out — neither filing a regular return nor enrolling in the scheme by the due date — face a staggered penalty regime: Rs10,000 for the first default, Rs25,000 for the second, and Rs50,000 for the third, with at least a month’s gap between each penalty proceeding.
The scheme comes with a notable cash-floor provision. While retailers can adjust withholding tax against their liability, they must still pay a minimum of Rs25,000 in cash with their annual return. Where withholding tax already exceeds the amount payable, no refund will be issued.
In a significant departure from standard compliance burdens, participants will file a simplified return declaring sales, purchases, expenses, net profit, and assets — with the form made available in Urdu and regional languages. They will be exempt from installing point-of-sale systems or digital invoicing infrastructure, and relieved of withholding tax obligations under Section 153 and minimum tax provisions under Section 113 of the Income Tax Ordinance.
Perhaps the most tangible sweetener is the promise of a quiet shop floor. The FBR said shopkeepers opting for the special procedure will generally not face tax audits. Investigations may only be triggered, in consultation with trade associations, when third-party information flags significant financial transactions, ownership of expensive assets, or misuse of the scheme for tax avoidance.
Retailers who enrol will also receive an FBR Compliant Shopkeeper Plate — dubbed the Green Plate — bearing a QR code, the shopkeeper’s name, National Tax Number, and business address. The FBR has assured that tax officials will, as a rule, not enter premises displaying the plate for matters covered under the special procedure, effectively turning it into a shield against on-the-spot inspections.
