FBR Empowered To Disconnect Utility Connections of Non-Compliant Small Traders
In a big step towards increasing tax compliance, the Federal Board of Revenue (FBR) has now been authorized to cut electricity and gas connections of small traders who still remain out of the tax net. The move follows after the Senate Standing Committee on Finance and Revenue endorsed a proposal to enhance the collection of taxes and bringing undocumented enterprises into the formal economy.
What’s Changing for Small Traders?
To make things easier for small shopkeepers and traders, the FBR is rolling out a fixed tax scheme, where traders will pay a set monthly amount — no complex paperwork or annual returns needed. And here’s the catch — the tax will be automatically added to their electricity bills.
Here’s how the fixed monthly tax will work:
| Monthly Electricity Bill | Fixed Tax Amount |
| Up to Rs. 30,000 | Rs. 3,000 |
| Up to Rs. 50,000 | Rs. 5,000 |
| Up to Rs. 100,000 | Rs. 10,000 |
Once this fixed tax is deposited via the electricity bill, it will be the last tax, and traders will not have to bother with any more income tax return fbr.
Using Electricity Data to Monitor Businesses
Utilizing Electricity Data to Monitor Businesses
As per FBR, approximately 2.3 million commercial electricity connections exist in the nation. With this information, they intend to monitor and tax small traders who have been in business without any tax registration. This online approach not only simplifies compliance but also lessens the likelihood of tax evasion.
Special Categories to Pay Higher Fixed Tax
Some types of businesses — such as luxury watch dealers and car showrooms — have been categorized as “special class traders.” These businesses will be required to pay a higher fixed tax of Rs. 50,000 per month, also through their electricity bills.
The Senate committee has advised FBR to clearly define which businesses fall under this special category to prevent confusion or misinterpretation.
Utilities Will Be Cut for Non-Compliant Tier-1 Retailers
A major highlight of this update is that Tier-1 retailers, which include large shops and businesses that meet specific revenue or space thresholds, must either register for sales tax or integrate their billing system with FBR’s POS system. If they don’t, FBR will now have the power to cut off their electricity and gas connections.
This move is designed to push big businesses, especially those still undocumented, into the formal tax structure.
The Case of Jewellers: Only 22 Out of 29,000 Compliant
FBR shared shocking stats during the briefing: out of 29,000 jewellers across Pakistan, only 22 are registered and integrated with the POS system.
Despite being small in space, jewellery shops deal in high-value products, and therefore, all of them qualify as Tier-1 businesses. Going forward, every single jewellery shop will be required to register and integrate with FBR’s sales tax system.
Why This Matters
These recent steps are part of a larger strategy to:
- Make tax filing simpler for smaller businesses
- Close in on large retailers who remain non-compliant
- Use available data (like electricity usage) to ensure fair tax collection
By linking tax payments to electricity bills and enforcing consequences for non-compliance, FBR is making it harder for businesses to stay undocumented, and that’s a good thing for Pakistan’s economy.
In a big step towards increasing tax compliance, the Federal Board of Revenue (FBR) has now been authorized to cut electricity and gas connections of small traders who still remain out of the tax net. The move follows after the Senate Standing Committee on Finance and Revenue endorsed a proposal to enhance the collection of taxes and bringing undocumented enterprises into the formal economy.
What’s Changing for Small Traders?
To make things easier for small shopkeepers and traders, the FBR is rolling out a fixed tax scheme, where traders will pay a set monthly amount — no complex paperwork or annual returns needed. And here’s the catch — the tax will be automatically added to their electricity bills.
Here’s how the fixed monthly tax will work:
| Monthly Electricity Bill | Fixed Tax Amount |
| Up to Rs. 30,000 | Rs. 3,000 |
| Up to Rs. 50,000 | Rs. 5,000 |
| Up to Rs. 100,000 | Rs. 10,000 |
Once this fixed tax is deposited via the electricity bill, it will be the last tax, and traders will not have to bother with any more income tax return fbr.
Using Electricity Data to Monitor Businesses
Utilizing Electricity Data to Monitor Businesses
As per FBR, approximately 2.3 million commercial electricity connections exist in the nation. With this information, they intend to monitor and tax small traders who have been in business without any tax registration. This online approach not only simplifies compliance but also lessens the likelihood of tax evasion.
Special Categories to Pay Higher Fixed Tax
Some types of businesses — such as luxury watch dealers and car showrooms — have been categorized as “special class traders.” These businesses will be required to pay a higher fixed tax of Rs. 50,000 per month, also through their electricity bills.
The Senate committee has advised FBR to clearly define which businesses fall under this special category to prevent confusion or misinterpretation.
Utilities Will Be Cut for Non-Compliant Tier-1 Retailers
A major highlight of this update is that Tier-1 retailers, which include large shops and businesses that meet specific revenue or space thresholds, must either register for sales tax or integrate their billing system with FBR’s POS system. If they don’t, FBR will now have the power to cut off their electricity and gas connections.
This move is designed to push big businesses, especially those still undocumented, into the formal tax structure.
The Case of Jewellers: Only 22 Out of 29,000 Compliant
FBR shared shocking stats during the briefing: out of 29,000 jewellers across Pakistan, only 22 are registered and integrated with the POS system.
Despite being small in space, jewellery shops deal in high-value products, and therefore, all of them qualify as Tier-1 businesses. Going forward, every single jewellery shop will be required to register and integrate with FBR’s sales tax system.
Why This Matters
These recent steps are part of a larger strategy to:
- Make tax filing simpler for smaller businesses
- Close in on large retailers who remain non-compliant
- Use available data (like electricity usage) to ensure fair tax collection
By linking tax payments to electricity bills and enforcing consequences for non-compliance, FBR is making it harder for businesses to stay undocumented, and that’s a good thing for Pakistan’s economy.
Final Word
While the new regulations are tight, they aim to build a more equitable and improved tax regime. Small traders have it streamlined with fixed monthly dues. For those big players who attempt to evade taxes, the message is clear: pay or be cut off.
This would be a giant leap in correcting Pakistan’s longstanding problem of tax evasion and establishing a stronger and more transparent economy for all.