The Senate Standing Committee on Finance on Wednesday expressed serious reservations over the imposition of an additional 4% tax on cash sales exceeding Rs. 200,000 and urged the Federal Board of Revenue (FBR) to focus on expanding the tax net rather than burdening existing taxpayers.
Committee Member Senator Mohsin Aziz strongly criticized the FBR for imposing the additional tax on top of the existing 18% sales tax for cash transactions above Rs. 200,000 while failing to bring undocumented retailers into the tax net. He said the government was penalizing formal businesses and registered sellers, leading to double taxation in some cases instead of widening the tax base by including small- and medium retailers.
The new tax was imposed through the introduction of Section 21 into the Income Tax Ordinance 2001 via the Finance Bill 2025. Since July 1, various companies and firms have advised their customers to ensure any transactions are in compliance with the new regulations.
Committee Chair Senator Saleem Mandviwalla questioned why the National Assembly’s finance committee had rejected recommendations agreed upon by the FBR during discussions with the Senate committee.
During the meeting, Senator Sherry Rehman voiced serious concerns over the FBR’s powers of arrest and proposed that a separate in-camera session to discuss the issue.
Remittances
The Senate committee also directed the State Bank of Pakistan (SBP) to review the Pakistan Remittance Initiative scheme amid concerns regarding the more than Rs. 100 billion in foreign exchange incentives being paid to foreign banks to encourage remittances through official channels.
Mandviwalla voiced concern over the outflow of significant public funds in dollars to international financial institutions, adding the scheme should be reassessed to offer incentives based on amount of remittance rather than per transaction. He noted that international cards charge users in dollars even for domestic transactions, which imposes unnecessary pressure on foreign reserves.
The committee further recommended that commercial banks issue local “PayPak” debit cards instead of international card providers like Visa and MasterCard, whose fees are paid in foreign currency. It directed the central bank to instruct banks to add the option of issuing Pakistani debit cards when opening new accounts. It also proposed a “dual” option, with users provided PayPak cards for domestic use and international cards for foreign transactions.
SBP Deputy Governor Inayat Hussain informed the committee that as of March 2025, around 53 million credit and debit cards were issued in Pakistan, including 10 million PayPak cards. Around 2.5 million of these are compatible for both domestic and international use, he said.