The Federal Board of Revenue (FBR) has rolled out three schemes to facilitate the retailers and small traders in complying with the tax regime.
The FBR has notified Simplified Scheme for Traders, Small Shopkeepers Scheme, and Business License Scheme. The initiative has been taken to make the tax requirements easier and bring the small businesses into the tax net, as 80 to 90 percent of the retailers are not registered with the tax authorities.
The board has also invited feedback from the stakeholders after which the schemes will be presented before the cabinet for final approval.
Simplified Scheme for Traders
The FBR has released the draft of the simplified tax regime for traders. The board states that it has prepared the scheme after conducting practical research and discussion on the issue. It also carried out an exclusive interaction with the trade bodies.
It recognized that the traders have genuine problems regarding tax compliance. The board maintained that it has addressed these issues via this tax scheme.
The scheme applies to the retailers and wholesalers having turnover less than Rs. 50 million, self-invested equity below Rs. 50 million, cost of fixed assets not more than Rs. 100 million, and the number of employees below or equal to five.
It does not apply to persons covered under the small shopkeeper’s scheme. Moreover, the scope of this scheme will be enhanced by 10 percent every year to account for the growth in business.
Under this scheme, the traders do not have to undertake the record-keeping for the computation of taxable income. The receipts minus expenditure would suffice. Moreover, these traders will not be subjected to any audit.
Furthermore, unregistered traders will be registered under the scheme by submitting the registration form on the Integrated Risk Information System (Iris) on the FBR website. The tax rates applicable on the said individuals are those prescribed under division 1, part I of the First Schedule of the Income Tax Ordinance, 2001.
The Special Procedures for Payment of Taxes by Small Shopkeepers defines small shopkeeper as an individual who operates at the premises with less than 300 square feet covered area. The individual will not qualify as a shopkeeper if he is a jeweler, warehouse, wholesale, or real estate agent, developer, builder, doctor, chartered accountant, lawyer or any other category specified by the board.
The definition also excludes retailers operating in an air-conditioned shopping mall, plaza or center, someone operating as a unit of a national or international chain of stores, a retailer having credit or debit card machine, a person whose cumulative electricity bill crosses Rs. 300,000 in the last 12 months, and a person included in Section 99C of the Income Tax Ordinance, 2001.
The tax rate will be two percent of the turnover or the amount of fixed tax rates notified by the board. The rates for Tax Year 2019 are:
- Rs. 35,000 if the shop is in the category A area and the area does not exceed 150 square feet.
- The tax rate for the said year will be Rs. 40,000 if the shop is in category A area and the area does not exceed 300 square feet.
- It will be Rs. 20,000 if the shop is located in any area other than A and its premises do not exceed 150 square feet.
- It will be Rs. 25,000 if the shop is in any place other than category A and the premises do not exceed 300 square feet.
The tax will be paid in two installments in a year. Moreover, the shopkeepers will not be audited at all. A sticker will be issued after the payment of tax in an authorized bank and the shopkeeper will be required to submit a one-page return form.
Registration of Businesses
The FBR plans to propose certain amendments in the Income Tax Rules, 2002 for simple and easy registration of businesses. The registration of all businesses has been made mandatory.
The scheme has introduced a simple application form for a person who wants to apply for the issuance of a license. The applicant can apply for the business license on Iris or any software application designed by FBR for this purpose by using the cell phone number and having access to the internet facility. The applicant will receive the system-generated business license via email.
If the applicant does not have any cell phone number or access to the internet, he can provide his details to personnel in a Kiosk set up by the Regional Tax Office or the service provider for online filing of the form. The details given by the person will be verified along with the biometric verification of the applicant. The applicant will then be issued a system-generated printout of the license.
Individuals who have already submitted their returns and are on the Active Taxpayers List (ATL) will be considered to have filed their application. They will be given a system-generated license via email.
Owners will be required to display the license at the premises of their business.