Pakistan Proposes Fixed Tax Scheme for Small Retailers in Budget 2026-27

Islamabad: Finance Minister Muhammad Aurangzeb has proposed the introduction of a fixed tax scheme for small retailers as part of the Federal Budget 2026-27, aiming to simplify tax compliance and encourage greater participation in the formal economy.

During his budget speech, the finance minister stated that the scheme would be available to shopkeepers and small businesses with annual sales of less than Rs200 million.

Under the proposed system, eligible retailers will pay a tax equal to one percent of their annual sales. The tax paid through withholding deductions will be adjustable against their final tax liability.

Muhammad Aurangzeb further announced that retailers opting for the fixed tax scheme will be required to pay a minimum of Rs25,000 when filing their annual tax returns.

The minister said businesses enrolled in the scheme will not be subject to routine audits. They will also be exempt from withholding tax obligations on purchases and will not be required to install Point-of-Sale (POS) machines.

To distinguish compliant businesses, retailers choosing the fixed tax system will be issued a green signboard. As long as the signboard is displayed, Federal Board of Revenue (FBR) officials will not be permitted to enter the shop for inquiries or inspections.

The government believes the initiative will simplify taxation for small businesses, reduce compliance costs, and promote voluntary tax registration among retailers.