Government Defers Action Against 1.2 Million Non-Filer Traders, Considers Three-Month Extension

ISLAMABAD: The government has deferred its decision to take action against approximately 1.2 million non-filer shopkeepers who failed to register under the newly introduced fixed tax scheme, while considering granting them an additional three-month deadline to comply with tax requirements.

According to sources, tax authorities presented two proposals to Finance Minister Muhammad Aurangzeb this week.

Under the first proposal, traders would be given an extension until January 31, 2027, to file their tax returns. However, those filing returns after the deadline would have to pay a surcharge of up to Rs85,000, which is Rs90,000 less than the penalty applicable under the regular tax regime.

The second proposal suggests taking action against non-compliant traders under the existing income tax laws. This would involve a minimum penalty of Rs175,000, tax audits and mandatory disclosure of complete details of their assets.

Minister of State for Finance and Revenue Bilal Azhar Kiani informed the National Assembly’s Standing Committee on Finance that the government would seek legal advice from the Attorney General before initiating any action. However, he made it clear that the scheme would not be extended further.

The government had introduced the fixed tax scheme for traders under which shopkeepers were required to pay only one per cent tax on their total sales. The scheme also offered exemption from audits and allowed cash transactions.

The government had expected at least one million out of approximately 3.8 million non-filer traders to join the scheme, generating an estimated Rs50 billion in tax revenue. However, only 222 new traders filed returns by the October 31 deadline.

Sources said tax authorities had identified approximately 1.5 million shopkeepers falling within the scope of the scheme. Of these, around 290,000 were already part of the tax system, while the remaining traders had not availed themselves of the scheme.

Under the proposed extension, traders could be allowed to file returns by paying penalties of Rs10,000 by the end of November, Rs35,000 by the end of December and Rs85,000 by the end of January 2027.

Tax authorities maintain that Section 214A of the Income Tax Ordinance empowers the government to grant general relief to small shopkeepers. However, questions have also been raised over the legality of granting preferential treatment to one category of taxpayers.

The National Assembly’s Standing Committee on Finance also expressed disappointment over the failure of the fixed tax scheme.

Committee Chairman Naveed Qamar questioned Prime Minister Shehbaz Sharif and the federal cabinet’s position, asking whether the government was prepared to impose penalties and initiate legal proceedings against traders despite their threats of strikes and protests.