Small Shopkeepers Scheme: FBR releases draft with fixed tax rates

ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday released the draft for Small Shopkeepers Scheme for four different categories with fixed tax rates ranging from Rs20,000 to Rs50,000 per annum on the basis of their size and locations.

This scheme will grant them opportunity to opt for fixed tax regime based on location and size of the shop having no audit or examination of such shopkeepers. The persons convicted under the Control of Narcotics Substances Act, 1997 (XXV of 1997), Anti Terrorism Act, 1997 (XXVII of 1997) and Anti-Money Laundering Act,2010 (VII of 2010) shall not be eligible to qualify under this scheme. The FBR issued the draft for Small Shopkeepers Scheme under Section 99B of the Income Tax Ordinance, 2001 for views and comments. After public review, the scheme will be put before the federal cabinet for final approval probably next week. Under the scheme, if a shop is located in area specified as category-A and the shop premises in which the business activity is carried out does not exceed 150 square feet, the rate of tax would be Rs35,000 for tax year 2019 and Rs40,000 for tax year 2020.

If the shop is located in area specified as category-A and the shop premises in which the business activity is carried out exceeds 150 square feet but does not exceed 300 square feet, the rate of tax would be Rs40,000 for the tax year 2019 and Rs50,000 for the tax year 2020. If it is located at any place other than category-A and the shop does not exceed 150 square feet, the rate of tax would be Rs20,000 for tax year 2019 and Rs25,000 for tax year 2020. If the shop is located at any place other than category-A and the shop premises in which the business activity is carried out exceeds 150 square feet but does not exceed 300 square feet, the rate of tax would be Rs25,000 for tax year 2019 and Rs30,000 for tax year 2020. For the purpose of said taxation, the category-A means an area where value of shop exceeds Rs10,000 per square foot as per FBR valuation table or DC rate whichever is higher as applicable.

In case if a person opts a fixed tax regime the amount referred, shall be paid in the manner laid down. In other case the tax under rule 3 shall be payable in two equal installments to the Commissioner in respect of first installment on or before the 30th day of September; and in respect of second installment on or before the 31st day of December; provided that for tax year 2019 the shopkeeper shall have the option of paying the tax under rule 3 along with return. Where the person opts to pay tax and furnish return under these rules, no deduction for expense, withholding credit or refund. The FBR states that the “Small Shopkeeper” means an individual where the business is carried out at a premises having covered area less than 300 square feet but does not include a shopkeeper if he is engaged in jeweler, wholesale, warehouse, real estate agent, builder and developer, doctor, lawyer, chartered accountant or any other category specified by the Board, a retailer operating as a unit of a national or international chain of stores, a retailer operating in an air-conditioned shopping mall, plaza or center, a retailer who has a credit or debit card machine, any person whose cumulative electricity bill exceeds Rs300,000 in the immediately preceding 12 months; and any person covered under section 99C of the Income Tax Ordinance, 2001.

The tax payable on profits and gains of a shopkeeper on his income chargeable under shall, higher of two percent of 'turnover' as defined in section 113 of the Ordinance; or the amount of tax as set out. Under the Small Shopkeepers Scheme, there shall be no audit or examination of such shopkeeper, unless so specified by the Board. The shopkeeper shall furnish return in Form ‘A’ specified in Schedule to these rules. The tax under rule 3 shall be paid in the State Bank of Pakistan, or authorized branches of banks and evidence in the form of a copy of computerized tax payment receipt (CPR) shall be furnished to the Commissioner by the due date as mentioned in rule 4. On receipt of evidence of payment of tax installment, the shopkeeper shall be issued a sticker which shall be displayed by the shopkeeper at a prominent place in the business premises. Where these rules apply— (a) the shopkeeper shall not be required to withhold tax from any person as required under the Ordinance; (b) the shopkeeper shall furnish return for the tax year by the due date or extended due date as specified under the Ordinance; (c) the shopkeeper shall not be required to file wealth statement under the provision of subsection (2) of section 116 of the Ordinance for the tax year for which return qualifies under these rules.

Where the shopkeeper has furnished return to the Commissioner under these rules, the Commissioner shall be treated to have made an assessment of the taxable income and tax payable on the tax due thereon for the tax year under the provisions of section 120 of the Ordinance. The return furnished shall be treated to be an assessment order issued by the Commissioner on the day the return was furnished under these rules and provision of section 120 of the Ordinance.

These rules shall not apply to the shopkeeper who fails to pay tax installments under rule 4; who fails to furnish a return for a tax year within the due date as extended period as specified under the Ordinance after having furnished a return once for any tax year under these rules provided that the shopkeeper may opt to furnish return under these rules after two tax years immediately following the tax year he failed to furnish return.

No action against any shopkeeper shall be undertaken unless the matter is taken up with the association of traders concerned after seeking approval from FBR. The Federal Government may, from time to time, by notification in the official Gazette, make amendment in these Rules.