Pakistan government on Friday announced a fixed tax regime for small retailers, introducing a simplified system under which a 1% tax will be applied on annual turnover of up to Rs200 million.

The announcement was made by Finance Minister Muhammad Aurangzeb alongside Minister of State Bilal Azhar Kayani during a press briefing.

The finance minister said the reform is aimed at improving transparency and strengthening the tax structure on a more sustainable basis, adding that the existing system places a heavier burden on salaried individuals and the formal corporate sector, while multiple sectors remain under-taxed.

He noted that the measure targets millions of small shopkeepers and is intended to broaden the tax base.

Officials said retailers with annual sales up to Rs200 million will fall under the scheme, under which 1% tax will be charged on turnover. Any already-deducted withholding tax will be adjustable against the final liability. A minimum payment of Rs25,000 at the time of filing will be required.

The scheme is optional, but those who opt in will receive reliefs including exemption from POS integration requirements and routine audit obligations. It will be available to both filers and non-filers.

Authorities warned that retailers who neither join this fixed regime nor remain in the normal tax system will face penalties.

Street vendors and cart-based sellers have been excluded from the scheme.