What FBR changed between 27 and 31 July 2026

The Federal Board of Revenue published several material measures during the week. Two have immediate operational importance: S.R.O. 1166(I)/2026 makes a final, optional income-tax procedure for qualifying small shopkeepers for Tax Year 2026, while S.R.O. 1245(I)/2026 prescribes electricity-unit-based sales-tax collection for steel melters, re-rollers and composite units with effect from 1 July 2026.

FBR also finalized independent case-scrutiny committees for income tax, sales tax and federal excise litigation. Some later changes are not final: the income-tax jurisdiction correction in S.R.O. 1239(I)/2026 and the reward-rate changes in S.R.O. 1226(I)/2026 are expressly drafts. That legal-status distinction matters.

The small-shopkeeper procedure is final and optional

S.R.O. 1166(I)/2026, dated 27 July, follows the draft published on 14 July and makes the Special Procedure for Small Shopkeepers. It applies for Tax Year 2026 to individuals earning income mainly through retail shops with annual turnover up to PKR 200 million.

The procedure excludes anyone whose turnover exceeded PKR 200 million in any of the previous three years, anyone owning more than one shop, Tier-1 retailers, jewellery sellers and professional service providers such as doctors, engineers and lawyers. It covers shop income only; other income remains outside the procedure.

Participation is voluntary. An eligible shopkeeper may use this procedure or file a regular income-tax return. Under the special procedure:

Tax is charged at 1% of gross turnover.
Withholding tax may be deducted from the amount payable, but excess withholding is not refundable under the procedure.
The cash payment with the return must be at least PKR 25,000. The payable amount is the higher of tax after withholding or PKR 25,000.
The simplified return is to disclose sales, purchases, expenses, net profit, other income and assets, and is intended to be available through IRIS or the shopkeepers' application in Urdu and regional languages.
A participating shopkeeper is not required to withhold tax on purchases under section 153, and the section 113 minimum-tax provisions and the stated 1.25% rate do not apply.
An eligible bona fide participant is exempted from installing a sales-tax POS system or digital-invoicing infrastructure under this procedure.

The notification also provides for a QR-coded compliant-shopkeeper plate and generally protects participants from audit, subject to limited proceedings based on third-party information about unusual transactions, expensive assets or gross misuse. A person who neither files a regular return nor opts into the special procedure by the due date may face escalating defaults of PKR 10,000, PKR 25,000 and PKR 50,000, with at least one month between proceedings.

One drafting inconsistency should be treated cautiously

The operative first clause says the procedure applies for Tax Year 2026. However, the heading of Annex I calls the simplified form an Easy Tax Return for Small Retailers for Tax Year 2025. The document therefore contains an apparent internal mismatch. The main rule and eligibility conditions should not be silently rewritten to resolve it; affected shopkeepers should use the final form made available in IRIS and check any FBR clarification before filing.

Steel sales tax is now tied to electricity consumption

S.R.O. 1245(I)/2026, dated 31 July, prescribes sales tax per unit of electricity consumed by steel melters, re-rollers and composite steel melting and re-rolling units. It covers grid electricity as well as captive or self-generated power, including electricity generated from bagasse or other sources. The notification says the per-unit amount is in addition to sales tax chargeable under section 3(1), but allows steel melters and composite units to adjust the tax paid under the notification against output sales tax.

The stated rates are:

PKR 30 per electricity unit for manufacturers using local remeltable iron and steel scrap.
PKR 5 per unit where imported scrap exceeds 70% of raw material consumption over the preceding twelve months.
PKR 5 per unit where scrap supplied by an Export Facilitation Scheme licensee exceeds 70% over the stated measurement period from 1 June 2026.
PKR 35 per unit for manufacturers using captive or self-generated electricity.

The notification also provides a PKR 5 rate for qualifying steel melters and composite units integrated with FBR's computerized system for real-time sales reporting where imported remeltable scrap exceeds the stated 70% threshold.

A manufacturer using at least 500,000 electricity units per month on one meter is categorized as a steel melter or composite unit; a manufacturer below that threshold falls into the re-roller category. Distribution companies are directed to apply the prescribed rates from 1 July 2026. In case of non-payment by the electricity-bill due date, the notification directs the relevant distribution company to disconnect the connection, alongside other legal action.

Because the notification is dated 31 July but takes effect from 1 July, steel businesses should reconcile July electricity usage, scrap-source evidence, FBR integration status and the classification applied by their electricity supplier against the final text.

Litigation-scrutiny rules moved from proposal to final rules

S.R.O. 1165(I)/2026 finalizes Income Tax Rule 231CB after the 21 July draft. S.R.O. 1169(I)/2026 and S.R.O. 1168(I)/2026 create parallel independent case-scrutiny committees for sales tax and federal excise. These are final notifications dated 27 July, not consultation drafts.

The frameworks establish three territorial committees. Each is chaired by a retired superior-court judge and includes an advocate with at least fifteen years of tax and commercial litigation experience and a senior serving or retired Inland Revenue officer. The committees review proposed High Court references and petitions to higher courts, reconsider pending litigation, maintain precedent databases and identify systemic issues.

A Commissioner generally has ten days from receipt of the relevant appellate order to refer a case. The committees are to sit daily and normally finalize a recommendation within fifteen days. If no decision is made within the permitted period, including any valid extension, the case is treated as cleared for filing subject to other legal requirements. Emergency filing may be approved where limitation is close or substantial revenue loss is imminent, with later review by the full committee. The rules also require annual anonymized summaries and an annual report.

S.R.O. 1237(I)/2026 and S.R.O. 1238(I)/2026, dated 30 July, make final technical corrections to the sales-tax and federal-excise committee jurisdictions by updating Islamabad, Lahore and Karachi office names. The equivalent income-tax correction in S.R.O. 1239(I)/2026 is still a draft and allowed three days from Gazette publication for comments.

Reward-rule changes are only proposed

S.R.O. 1226(I)/2026, dated 30 July, proposes amendments to rule 8 of the Inland Revenue Reward Rules, 2021. The draft would replace a 5% figure with 2% and a 2.5% figure with 1%, along with a cross-reference correction. It allowed seven days from Gazette publication for objections or suggestions. These percentages should not be treated as amended final rules unless FBR publishes a final notification.

What affected businesses should check now

Small shopkeepers: confirm that the person, turnover, number-of-shops and business-type tests are met before comparing the optional procedure with a regular return.
Steel manufacturers: reconcile electricity meters, power source, scrap mix, EFS documentation, real-time integration and July billing against S.R.O. 1245.
Tax litigants and advisers: update internal status notes because income-tax, sales-tax and federal-excise scrutiny committees are now final, while the related income-tax office correction remains a draft.
Everyone: preserve the final-versus-draft distinction in advice, filings and compliance checklists.

Official FBR sources

The bottom line

The small-shopkeeper procedure and the steel electricity-based collection regime are final measures, as are the new income-tax, sales-tax and federal-excise litigation-scrutiny frameworks. The reward-rate changes and the income-tax office-jurisdiction correction remain proposals.

Disclaimer: This article summarizes official FBR documents reviewed on 3 August 2026. It is general information, not legal or tax advice for a particular taxpayer, filing or transaction. Check the official Gazette, IRIS implementation and any later FBR clarification before acting.

FBR Weekly Tax Update: Final Small-Shopkeeper Scheme and Steel Electricity Tax