Tax collection from retailers has experienced an unprecedented surge of 98% during the first seven months (July – January) of the ongoing fiscal year 2024-25, reflecting the effectiveness of enhanced tax compliance measures and enforcement strategies implemented by the Federal Board of Revenue (FBR). According to sources within the FBR, this increase is a direct result of the expanded application of tax regulations and intensified monitoring efforts.
Significant Revenue Growth
During the first seven months of FY25, the FBR successfully collected Rs 19.45 billion from retailers, a substantial rise from Rs 9.80 billion recorded in the corresponding period of the previous fiscal year. This significant boost in revenue is attributed to the widening scope of tax regulations, stricter enforcement mechanisms, and a concerted push toward broadening the tax base.
Implementation of Section 236H
A key factor behind this increase is the implementation of tax collection under Section 236H of the Income Tax Ordinance, 2001, which mandates withholding tax on retailers. The ordinance prescribes different tax rates based on the taxpayer’s filing status, with filers subjected to rates of 0.1% and 0.5%, whereas non-filers are taxed at higher rates of 2% and 2.5%. The extension of this provision across multiple sectors has significantly contributed to the upward trajectory in tax collection.
Impact of Digitization and Monitoring
FBR officials highlighted that the integration of digital tools and increased surveillance of retailers have played a crucial role in strengthening tax compliance. The expansion of the tax net has encouraged businesses to register and fulfill their tax obligations, ultimately leading to higher revenue collection. Enhanced documentation and monitoring mechanisms have ensured that more retailers are brought under the tax umbrella, reducing instances of tax evasion.
Growth in Wholesaler Tax Collection
The impact of these regulatory changes has not been limited to the retail sector alone. The wholesaler segment has also witnessed substantial growth in tax collection. The FBR recorded a collection of Rs 13.77 billion from wholesalers in the same period, reflecting a remarkable 144% increase compared to Rs 5.64 billion collected in the corresponding months of the previous fiscal year. This surge is indicative of the broader success of policy measures aimed at improving tax compliance across various business categories.
Future Prospects and Economic Impact
Industry experts believe that the consistent rise in tax collection from retailers will play a pivotal role in fostering economic stability and enhancing fiscal revenue. They emphasize that ongoing efforts to improve enforcement mechanisms, integrate digital solutions, and promote voluntary tax compliance will further strengthen the tax collection framework, ensuring continued revenue growth in the future.
Commitment to Expanding the Tax Base
The FBR remains steadfast in its commitment to expanding its revenue base, particularly within the retail sector, to meet its fiscal targets and contribute to the overall economic formalization. The latest developments signify a crucial step toward improving tax compliance, broadening the tax net, and ensuring a more robust and transparent economic environment.
