- Foreign vendors with a digital presence in Pakistan will be charged a 5% tax on digitally ordered goods and services
- Courier services involved in cash-on-delivery transactions will also be subject to new taxes; govt eyes Rs64 billion in revenue
The government has introduced new taxation measures targeting e-commerce businesses, digital service providers, and courier services, aiming to raise Rs64 billion in the next fiscal year. To capture the growing digital transaction market, the government has also introduced a “Digital Transactions Proceeds Levy” that applies to both domestic and foreign vendors, with banks and courier services designated as withholding agents to ensure the collection of taxes throughout the payment chain.
A range of taxes will be imposed on digital services, including those provided by e-commerce platforms, websites, social media, and courier companies. The government has defined “digitally delivered services” as those services provided over the internet or electronic networks, requiring minimal or no human intervention. These services include music and video streaming, cloud services, telemedicine, e-learning, online banking, and accounting services.
E-commerce businesses will now face taxes ranging from 0.25% to 5%. The new tax applies to digital services provided by both local and foreign vendors. Foreign vendors with a digital presence in Pakistan will be charged a 5% tax on digitally ordered goods and services, whether delivered digitally or physically. Banks will be required to deduct this 5% tax from payments made to these vendors.
On local e-commerce platforms, the government has proposed a tiered tax structure. A 1% tax will apply to transactions where the amount does not exceed Rs10,000. A 2% tax will be imposed on transactions under Rs25,000, and any amount above Rs25,000 will be taxed at a reduced rate of 0.25%.
Additionally, courier services involved in cash-on-delivery (CoD) transactions will be subject to new taxes. The government has proposed a tax rate of 0.25% on electronics and electrical goods, 2% on clothing articles, and 1% on other goods. These taxes will be collected by courier services when goods are delivered and paid for via CoD.
Furthermore, the new tax regime requires all online marketplaces, payment intermediaries, and courier service providers to file detailed statements with the Commissioner, sharing data of sellers involved in digitally ordered goods and digitally delivered services. This is intended to ensure transparency and improve tax collection from the e-commerce sector.
The government has also proposed a set of penalties to encourage compliance. Online marketplaces that allow unregistered vendors to use their platform will face a fine of Rs1 million. Furthermore, banks, payment gateways, and courier services that fail to deduct or remit the appropriate taxes will be liable to pay a fine equal to 100% of the tax involved in the transaction.
To tighten tax compliance across digital marketplaces, the definition of “e-commerce” has been broadened. Now, all online transactions, whether paid via digital payments or cash on delivery (CoD), will fall under the e-commerce sales tax framework. This will allow the government to better regulate and tax the rapidly growing online market, ensuring that all transactions are accounted for.
The government has also proposed to double the withholding tax rate on e-commerce transactions from 1% to 2%, reflecting the growing volume of digital transactions in Pakistan.
As part of the broader effort to tighten tax compliance in the digital sector, online platforms will be required to register all sellers using their services for e-commerce transactions. This is designed to ensure that businesses involved in digital commerce are properly registered and compliant with the tax system.
These new tax measures are part of the government’s strategy to generate additional revenue and regulate the fast-evolving e-commerce industry. However, they may face resistance from businesses and consumers who are concerned about the impact on digital growth and online shopping costs.
