ISLAMABAD: The Federal Board of Revenue (FBR) has announced the commencement of a sweeping registration drive under the Tajir Dost Scheme, designed to integrate traders and wholesalers into the formal tax framework by April 30.

Scheduled to start on April 1, this initiative facilitates free registration and extends a variety of tax-related benefits to incentivise participation.

The FBR has warned that failure to register voluntarily by the deadline will trigger automatic enrolment and the imposition of stringent fines.

A notification — SRO 457 of 2024 — issued on Saturday notified the special procedures of the Tajir Dost Scheme. According to the FBR estimates, the initiative will generate about Rs400 billion to Rs500 billion in additional revenue annually.

The categories of people who must be registered include traders, shopkeepers, wholesalers, retailers, dealers, manufacturer-cum-retailers, importer-cum-retailers, and anyone who combines retail and wholesale activities with any other business activity or person in the supply chain of goods.

The initiative is only for registering unregistered traders, dealers, wholesalers, and all unregistered importers and manufacturers who operate through retail outlets. This plan is not for companies or national or international chain stores operating in multiple cities.

As part of the initiative, registration drives will be launched in six main cities: Islamabad, Rawalpindi, Karachi, Quetta, Lahore, and Peshawar. The FBR will also use numerous channels to publicise the initiative and will involve trade bodies in the registration campaign.

All unregistered traders and shopkeepers will apply for registration under Section 181 of the Income Tax Ordinance, 2001, and register themselves in easy steps through the Tajir Dost module in the Tax Asaan app. They can register through their mobile phones, FBR’s web portal, or by visiting the board’s Tax Facilitation Centres. The mobile app is also available in Urdu.

There is no registration fee. Registration under the scheme only requires the applicant’s name, CNIC number, city name, mobile number, provider mobile and service power consumer number. No help from a tax lawyer, tax accountant or tax practitioner is required to register under the scheme.

The FBR will begin obligatory registration of individuals after April 30. Failure to register will result in monetary penalties under Section 182 of the Income Tax Ordinance 2001.

Incentives under Tajir Dost Scheme

The FBR has also incentivised people who take advantage of the scheme before the deadline. Under the scheme, taxpayers will receive a 25 per cent discount on monthly advance tax payments if they pay the whole advance tax bill in one lump sum.

Similarly, a taxpayer will be eligible for a 25pc discount on monthly advance tax payments if they are non-filers of tax returns and file tax returns for tax year 2023 before the due date of the first monthly instalment advance tax, which is July 15, 2024.

Furthermore, if a person is a non-filer and files a return for the tax year 2023 by July 15 and makes 12 monthly advance tax payments for the tax year 2024 in one go on or before July 15, they will receive a 50pc discount on advance tax.

Despite contributing 18pc to the gross domestic product, the tax contribution of the retail and wholesale sectors stands at a mere 4pc. Recognising this disparity, the government has been striving for years to incorporate this sector into the tax net effectively. However, these attempts have yet to yield the desired results.

Since 2019, three different schemes have been proposed, but none have been implemented due to a lack of political resolve and opposition from the trading community.

At present, only 300,000 of an estimated 3.5 million retailers are actively filing tax returns. The newly proposed scheme aims to bring the remaining 3.2m retailers, primarily located in major cities, into the tax net.

This initiative represents a significant step towards expanding the tax base and enhancing revenue collection.

Published in Dawn, March 31st, 2024