The federal government, in its Budget 2026-27, has announced a new fixed tax scheme for small shopkeepers and traders aimed at simplifying taxation and expanding the formal economy, according to the budget speech.
Under the scheme, traders with an annual turnover of Rs 200 million or less will be eligible for the simplified taxation system.
According to the budget announcement, eligible small traders will be required to pay a 1 percent tax on annual sales, replacing complex income-based assessments with a turnover-based system.
Officials said the move is intended to reduce compliance burdens and encourage more traders to enter the formal tax net.
As part of the new framework, traders will also be allowed to adjust withholding tax while filing their returns.
A minimum fee of Rs 25,000 will be required at the time of return submission, according to the budget speech.
No audit and reduced compliance burden
One of the major features of the scheme is that traders opting into the system will not be subject to audit, a move described by officials as a step toward easing regulatory pressure on small businesses.
Additionally, beneficiaries will not be treated as withholding agents, removing further administrative responsibilities.
The government has also decided to exempt small traders under this scheme from mandatory POS machine requirements, reducing the need for digital sales infrastructure in smaller shops.
Officials said this would help informal retailers gradually transition into the tax system without high compliance costs.
To identify compliant businesses, traders enrolled in the scheme will be issued a green plaque to display at their shops.
The plaque will include a QR code for verification, allowing authorities and customers to confirm registration status digitally.
According to the budget speech, FBR officials will not be allowed to enter shops for questioning of those who are part of the scheme, providing an added layer of protection and predictability for small traders.
Budget 2026-27
The total outlay of Pakistan's federal budget 2026-27 is estimated at around Rs18.771 billion, with a focus on fiscal consolidation, IMF compliance, and modest relief measures.
Key figures include an ambitious FBR tax target of around Rs15.264 trillion, non-tax revenue of Rs2.77 trillion, and Petroleum Development Levy of Rs1.73 trillion.
Major expenditures are dominated by debt servicing (Rs8.54 trillion), defence (Rs3 trillion), and a constrained federal PSDP of Rs1 trillion (national development outlay Rs 3.2–3.7 trillion).
According to the Ministry of Finance, Rs1,169 billion has been allocated for pensions and Rs1,71 billion for civil government affairs.
The budget follows an Economic Survey showing around 3.7% GDP growth in the outgoing year and includes expected 10% salary/pension increases alongside tax base broadening efforts.
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