Action against 1.2 million non-filer traders may be deferred by three months

The government is considering a three-month extension for nearly 1.2 million shopkeepers who did not opt for the new fixed tax scheme, according to The Express Tribune and Express News. Action against them has been put off for now, and about 6,000 of these traders can be physically verified.

Tax authorities presented two options to Finance Minister Muhammad Aurangzeb. The first would let shopkeepers file returns until January 31, 2027, with surcharges of Rs10,000 by end-November, Rs35,000 by end-December and Rs85,000 by end-January. The maximum of Rs85,000 is Rs90,000 less than under the normal tax regime.

The second option would apply the normal income tax law. It carries a minimum penalty of Rs175,000, exposure to tax audit and full asset disclosure.

The scheme let traders pay 1% tax on total sales in exchange for audit exemption and permission to deal in cash. The government had hoped at least one million of 3.8 million non-filers would join and pay at least Rs50 billion in income tax this year. Only 222 new traders filed returns and paid a negligible amount by the October 31 deadline.

The government identified nearly 1.5 million retailers within the scheme's scope, of whom about 290,000 were already in the tax system. Among the 1.2 million, about 390,000 were registered retailers who filed under neither the new scheme nor the old law, and another 772,000 were unregistered.

Minister of State Bilal Azhar Kayani told the National Assembly Standing Committee on Finance that the government would seek the attorney general's opinion before enforcement. He said no extension would be given and that enforcement and fines would begin. The committee expressed disappointment over the scheme's failure. Chairman Syed Naveed Qamar asked whether the prime minister and federal cabinet favoured punitive action despite traders threatening a strike.

Tax authorities believe Section 214A allows general condonation for small shopkeepers, and extensions under it are capped at two years in aggregate. Critics raise a legal question about discrimination against other taxpayers, who face a Rs25,000 fine for late returns. Rule 10 sets penalties of Rs10,000, Rs25,000 and Rs50,000 for first, second and third defaults.