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Pakistan: Special income tax procedure for small retailers; other direct and indirect tax developments

Voluntary scheme offers simplified filing and audit exemption for eligible retailers

August 6, 2026

The Federal Board of Revenue (FBR) on July 27, 2026, issued S.R.O. 1166(I)/2026 establishing a voluntary special procedure for small retailers under section 99B of the Income Tax Ordinance, 2001.

The scheme is open to individuals earning income mainly through retail shops with annual turnover up to PKR 200 million. Excluded from the scheme are multi-shop owners, tier-1 retailers, jewelry sellers, professional service providers, and those who exceeded the turnover threshold in any of the preceding three years. Eligible retailers can register via IRIS, the mobile application, or a tax office, and must pay 1% of gross turnover, subject to a minimum tax of PKR 25,000 in cash. Participants would be generally exempt from audits (except on specific third-party information), section 153 withholding obligations, section 113 minimum tax, and point of sale (POS) or digital invoicing requirements. Compliant shopkeepers will receive a QR-coded "Green Plate" barring FBR officials from entering the shop on tax matters. Non-filers who do not opt in face escalating surcharges of PKR 10,000, PKR 25,000, or PKR 50,000 for successive defaults.

Read a July 2026 report prepared by the KPMG member firm in Pakistan

Other tax developments that may affect businesses in Pakistan include:

  • Income tax surcharge and penalty exemption finalized Pakistan International Airlines Corporation Limited (PIACL) [S.R.O. 1129(I)/2026, dated July 16, 2026]
  • Procedure for claiming credit against sales tax withheld by filer tax number (FTN) holders [Circular No. 1(1)ST-L&P/2024/IRIS-Proc, dated July 20, 2026]
  • Exporter facilitation committees constituted by FBR [Circular No. 1(500)SA-M(IR-Ops)/2026-27, dated July 23, 2026]
  • Independent case scrutiny committees [Circular No. 1(500)SA-M(IR-Ops)/2026-27, issued July 23, 2026 | S.R.O. 1165(I)/2026, S.R.O. 1168(I)/2026, and S.R.O. 1169(I)/2026, issued July 27, 2026]
  • Federal government grants conditional exemption from default surcharger and penalty to PIACL [S.R.O. 1134(I)2026, dated July 17, 2026]
  • Extension for time for voluntary corporatization of iron and manufacture [C.No. 1(200)ST-L&P/2026/82342-R, dated July 29, 2026]
  • Removal of difficulty for voluntary corporatization of iron and steel manufacturers [STGO No. 12 of 2026, dated July 31, 2026]
  • Sales tax on electricity consumed by steel melters, re-rollers, and composite units [S.R.O. 1245(I)/2026, dated July 31, 2026]
  • Revised rates of Baluchistan sales tax on services (effective July 1, 2026) [Circular No. BRA/COM/OPS/2026-27/25, dated July 10, 2026]
  • Food delivery platforms declared as collection agents [Notification No. KPRA/ADMN/Regulation/2026/3073, published on July 2, 2026]
  • Clarification to Tribal Global Construction, M/S Best One Construction Company, and KP-TEVTA on 2% sales tax on legal services
  • Customs marine bunkering rules, 2026 [S.R.O. 1082(I)/2026, dated July 7, 2026]
  • Application of Section 78 to off-dock terminal [S.R.O. 1083(I)/2026, dated July 7, 2026]
  • Amendments to S.R.O. 678(I)/2004 – omission of condition (viii) [S.R.O. 1101(I)/2026, dated July 13, 2026]
  • Amendments to customs rules, 2001 transit/transshipment cargo [S.R.O. 1130(I)/2026, dated July 17, 2026]
  • Declaration of customs-port for M/s Fast Track Projects & Logistics (Pvt.) Ltd. [S.R.O. 1139(I)/2026, dated July 20, 2026]

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. KPMG LLP does not provide legal services.

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