FBR moves to penalise non-compliant retailers

FBR moves to penalise non-compliant retailers

The Federal Board of Revenue (FBR) has decided to take action against retailers who failed to file income tax returns under the government’s fixed tax scheme, with non-compliant shopkeepers facing a penalty of Rs150,000 along with a notice to file their returns.

The decision comes after a weak response to the new fixed tax regime, which offered retailers a simplified tax arrangement in exchange for compliance. The Rs150,000 penalty would significantly exceed the Rs10,000 first-month penalty introduced under Prime Minister Shehbaz Sharif’s earlier retailer tax scheme.

FBR management has also set a target to map around 30,000 traders who could receive notices for non-compliance. However, officials believe achieving the target may prove difficult.

Government sources said an internal review of the scheme found that it lacked effective enforcement measures to encourage traders to become tax filers. FBR officials also noted that the Rs10,000 penalty under the new scheme was considerably lower than the penalties prescribed under the Income Tax Ordinance for failing to submit income tax returns and wealth statements.

Under the scheme, retailers could pay fixed income tax equivalent to 1% of their turnover or a minimum of Rs25,000. In return, they could avoid audits and continue cash-based transactions without installing digital payment machines.

As of Wednesday, only 100 newly registered retailers had filed returns and paid a combined Rs3.2 million in tax for tax year 2026, which ended in June. Each retailer paid an average of Rs32,000, around Rs7,000 above the minimum tax requirement.

Although 2,593 new retailers have registered under the scheme, only 100 have so far filed returns. Overall, more than 1,000 returns have been submitted, but around 99% came from traders who were already part of the tax system and contributed relatively little in additional revenue.