ISLAMABAD: The federal government has proposed a major change in the Finance Bill 2026-27 by expanding the scope of sales tax withholding under the 11th Schedule to include Associations of Persons (AOPs) and individuals, in addition to companies.
According to tax expert Arshad Shehzad, purchases made by companies from unregistered or non-active taxpayers are currently subject to a 5 percent sales tax withholding. Under the proposed amendment, the same requirement will also apply to AOPs and individuals, significantly widening the reach of the provision.
Shehzad described the move as a significant amendment that could increase the cost of purchases from unregistered businesses by up to five percent. He said the government aims to discourage transactions with unregistered entities and encourage documentation of the economy.
However, he argued that the additional burden would largely fall on registered businesses, which would have to bear higher operating costs, while unregistered persons would remain outside the tax net.
The tax expert urged the government to review the proposal, particularly for export-oriented sectors, warning that it could place additional pressure on compliant businesses.
The amendment comes on top of existing further tax and extra sales tax measures already imposed on transactions involving unregistered and non-active taxpayers.
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