Proposal to grant further time to non-filer shopkeepers for filing tax returns

The government has deferred immediate action against approximately 1.2 million non-filer shopkeepers who did not join the fixed tax scheme. Tax authorities have presented two proposals to Finance Minister Muhammad Aurangzeb, one of which includes granting traders an additional three-month grace period.

According to sources, the first proposal recommends allowing traders to file their tax returns by January 31, 2027. During this period, those filing late would be required to pay a surcharge of up to 85,000 rupees—an amount 90,000 rupees lower than the penalties imposed under standard tax laws.

Under the second proposal, if no grace period is granted, traders would face proceedings under standard income tax laws. This would entail a minimum penalty of 175,000 rupees, a tax audit, and a mandatory requirement to provide full details of their assets.

Proposed Schedule for Penalty Payments

Tax authorities have proposed providing traders the opportunity to file their returns by paying a penalty in stages. According to the proposed schedule, a surcharge of 10,000 rupees could be collected by the end of November, 35,000 rupees by the end of December, and 85,000 rupees by the end of January 2027.

Bilal Azhar Kayani, Minister of State for Finance and Revenue, informed the National Assembly’s Standing Committee on Finance that a legal opinion would be sought from the Attorney General before any action is taken. However, he stated that there would be no further extension to the fixed tax scheme. 

Lack of Interest Among Traders in the Fixed Tax Scheme

The government introduced a "Fixed Tax Scheme" to bring shopkeepers into the tax net, under which traders were required to pay a tax of only one percent on their total sales. Additionally, they were granted exemptions from tax audits and permitted to conduct cash transactions.

The government had anticipated that at least 1 million of the country’s 3.8 million non-filer traders would join the scheme, with an expected tax collection of 50 billion rupees. However, by the October 31 deadline, only 222 new traders had filed their tax returns.

According to sources, tax authorities identified approximately 1.5 million shopkeepers who fall within the scope of this scheme. Of these, 290,000 were already part of the tax system, while the remaining traders did not avail themselves of the scheme.

Questions Regarding Legal Exemptions

Tax authorities maintain that, under Section 214A of the Income Tax Ordinance, the government is empowered to grant general exemptions to small shopkeepers. Nevertheless, questions are being raised regarding the legal justification for providing special concessions to traders—effectively treating them differently from other taxpayers.

The National Assembly’s Standing Committee on Finance has also expressed disappointment over the low participation of traders in the Fixed Tax Scheme. Questioning the stance of Prime Minister Shehbaz Sharif and the Federal Cabinet, the committee’s chairman, Naveed Qamar, asked: Is the government prepared to impose fines and initiate legal action against traders, despite their threats to go on strike?