David Cameron wants to give local councils the powers to let large stores in England and Wales open longer than the current six hours on Sundays.
But his plans had faced mounting opposition and on Tuesday the SNP announced it would vote against the proposals meaning they would almost certainly have been defeated.
Labour and a group of at least 20 Conservative MPs were also planning to vote no to the plans.
Last night the government put the vote on hold but Downing Street denied it was a 'u-turn'.
A spokeswoman for the prime minister said he'd outline the next steps for the proposals in "due course".
Christian MP Derek Thomas was one of the Tories planning to rebel against the government on the bill.
The member for West Cornwall and the Isles of Scilly said: "The Sunday trading hours we have now are a valued compromise that have worked for over 20 years and don't require change.
"The current legislation strikes a perfect balance for families to spend quality time together at the same time as allowing people to shop."
"Changing the law would have a negative impact on many of the small local shops that will have to compete with the big supermarkets that will be open longer.
"Removing Sunday trading will not increase trade but displace it from small businesses to large ones. I am supporting the Keep Sunday Special campaign and plan to vote against any changes to Sunday trading legislation."
The Scottish Nationalists said they would vote against the bill, despite longer trading hours already being in place in Scotland, because they feared it would drive down wages for workers north of the border.
Currently workers in Scotland who agree to take shifts on a Sunday are often paid an increased hourly rate.
The government launched a consultation in the summer to gather opinions about its plans which ministers claim will help support the High Street.
Faith groups have come together to oppose the changes.
It has been reported the government will bring the bill before parliament next year when the SNP is not allowed to vote on issues that only affect England and Wales.