The Federal Board of Revenue (FBR) on Thursday unveiled drafts of simplified income tax schemes to address traders and small shopkeepers’ concerns that had compelled them to remain outside the tax net.
The FBR notified three schemes including simplified tax regime for traders, fixed tax regime for small shopkeepers and issuance of business licences to bring the undocumented sectors under the tax net.
The schemes are part of government’s documentation drive to bring small businesses in the tax net. Despite several attempts in the past, documentation efforts have been thwarted by powerful traders’ representatives.
Economic Affairs Minister Hammad Azhar said that despite contributing 20 per cent to the country’s total GDP, the retail sector’s contribution to the tax was just 0.25pc. He said that around 80-90pc of the retailers were not registered with the tax authorities.
Schemes that notified for shopkeepers and small businesses to register themselves
Eligible traders
The retailers having turnover of less than Rs50 million, self-invested equity of less than Rs50 million, cost of fixed assets of less than Rs100 million and number of employees less than or equal to five are eligible to get benefit from the scheme.
The thresholds as prescribed shall be increased by 10% each year to account for economic progression in business. The traders’ scheme would not be applicable for small shopkeepers.
All persons who are not already registered with the FBR will be registered under this scheme and shall submit the registration form through the FBR online system IRIS.
In case of loss for the year or tax liability less than 1.5% of turnover, the traders will pay a minimum tax of 1.5%.
Small shopkeepers
The FBR has defined “small shopkeeper as an individual who carries out business at a premises having covered area of less than 300 square feet but does not include a shopkeeper if he is engaged as a jeweller, wholesaler, warehouse owner, real estate agent, builder and developer, doctor, lawyer, chartered accountant or any other category specified by the FBR”.
The small shopkeeper will pay only 2% of turnover as tax rate or fixed from Rs20,000 to Rs40,000 income tax, whichever is higher. The fixed tax rate will depend upon the size and location of the shop. These people will pay their taxes in two instalments, first before September of every year and second before December of every year.
The shopkeeper will become ineligible for the scheme, if he does not pay due tax or does not file the income tax return.
Business licence
The FBR also issues rules for applying for a business licence. Any person having a cell phone number, having access to the internet facility will have to apply for a business licence to do business in Pakistan.
Where the applicant is not having any cell phone number issued by any mobile phone company or not having access to internet facility, he shall provide the particulars to the service provider or the personnel in a kiosk established by a Regional Tax Office, for online filing of the form, and the service provider or the personnel in the kiosk for getting the business licence.
Every person who has been issued a business licence under these rules, shall display the said licence at every place of business.
The FBR also clarified that sales tax can only be recovered from the customer if the supplier is registered for sales tax purposes and reflects the Sales Tax Registration Number (STRN) on the invoice/receipt issued to the customer.
