ISLAMABAD: The federal government has proposed a major amendment in the Finance Bill 2026-27, expanding the scope of sales tax withholding under the 11th Schedule to include Associations of Persons (AOPs) and individuals, in addition to companies.
Tax expert Arshad Shehzad explained that currently purchases made by companies from unregistered or non-active persons are subject to a 5 percent sales tax withholding. With the proposed changes, this provision will now extend to AOPs and individuals, significantly broadening its application.
Shehzad termed this amendment as a significant one in the bill, noting that it could raise the cost of purchases from unregistered persons by up to five percent. He argued that while the government’s intention is to discourage unregistered businesses by increasing their cost of operations, in practice, the burden will fall on the documented sector, which must absorb these additional taxes.
He further highlighted that unregistered persons, being outside the tax net, remain largely unaffected by such measures. Instead, registered businesses face higher costs of doing business.
Shehzad urged the government to revisit this policy to ensure that compliance efforts do not inadvertently penalize the documented sector or at-least it should not be applicable for export sectors.
It is important to note that the government already collects further tax and extra sales tax on transactions involving unregistered and non-active taxpayers, making this expansion another layer of compliance for the formal economy.
Copyright Business Recorder, 2026
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