Officers Restricted from Entering Small Shops as FBR Rolls Out New Procedure.

In a major move to address the trust deficit between small traders and tax authorities, the Federal Board of Revenue (FBR) has officially barred Inland Revenue officers from entering the premises of small retail shops that display the FBR’s newly introduced “Green Plate”.

The landmark policy, formalized through S.R.O. 1109 (I)/2026, establishes a voluntary draft “Special Procedure for Small Shopkeepers” for the Tax Year 2026. By offering legal protection against arbitrary physical inspections, the FBR hopes to encourage voluntary compliance and simplify the tax filing process for millions of undocumented retailers across Pakistan.

What is the “Green Plate” Safeguard?

The Green Plate acts as a physical shield for small businesses. Once a shopkeeper registers under this simplified regime, they will be issued a compliance plaque containing:

• A government-specified QR Code containing the shop’s precise location and ownership details.
• The registered shopkeeper’s name and National Tax Number (NTN).
• The official address of the retail outlet.

The Golden Rule: Under the newly notified rules, no FBR officer or official is legally authorized to enter a shop displaying this plate for routine tax-related matters.

Core Mechanics: Tax Rates & Eligibility

The scheme is intentionally built around a flat-rate structure to bypass the complex accounting audits that historically terrified small-scale traders.

1. Eligibility Criteria

• Turnover Limit: The procedure applies to individual shopkeepers with an annual gross turnover of up to Rs. 200 million.
• Exclusions: It does not apply to retailers whose turnover exceeded Rs. 200 million in any of the preceding three years, multi-shop owners, Tier-1 retailers, jewelry sellers, or professional service providers (such as doctors, lawyers, and engineers).

2. The 1% Flat Tax Rate

• Taxpayers will pay 1% of their gross annual turnover as their final income tax.
• Minimum Base Payment: Every participant must pay a minimum of Rs. 25,000 in cash along with their tax return, regardless of any prior tax deductions at source.
• Withholding Tax Adjustment: Advance withholding taxes paid on commercial electricity bills or properties can be adjusted against this liability.

Simplified Filing on IRIS and Mobile App

To make the process as accessible as possible, the FBR has designed a single-page, simplified return form that will be made available on the IRIS web portal and a dedicated mobile app in Urdu and other regional languages.

[Annual Sales] ──> [Annual Purchases] ──> [Business Expenses] ──> [Net Profit & Legitimate Assets]

Unlike normal taxpayers, retailers enrolled under this scheme are exempt from mandatory Point-of-Sale (POS) integration and standard withholding tax obligations on their business purchases.

Transitioning & Non-Compliance Risks

For shopkeepers transitioning from the Tax Year 2025 normal filing, the FBR has put in place a strict anti-splitting safeguard: the tax payable under this new scheme cannot be lower than what they paid in 2025. Businesses are also barred from splitting up or renaming their stores to artificially qualify.

While the voluntary program offers a peaceful “out” for shopkeepers, the FBR is pairing it with escalating monthly penalties for eligible retailers who choose to remain completely unregistered:

• Month 1 Default: Rs. 10,000 penalty
• Month 2 Default: Rs. 25,000 penalty
• Month 3 Default and Beyond: Rs. 50,000 recurring monthly penalty, with potential sealing of the physical shop.

This policy represents a dramatic pivot in Pakistan’s tax enforcement strategy—moving away from heavy-handed administrative raids and toward structured, carrot-and-stick financial incentives to formally document the retail market.