Will Pakistani shoppers return to Daraz as Temu's tax-induced price surge backfires?

The honeymoon period for Chinese e-commerce giant Temu in Pakistan appears to be over. Following the implementation of Pakistan's aggressive 2025-26 tax overhaul targeting digital commerce, Pakistani consumers are witnessing dramatic price increases on the platform that once promised customers could shop like a billionaire with rock-bottom prices.

What started as a Rs 250 LED strip light in December 2024 now costs upwards of Rs 850 on Temu, representing a staggering 240% price increase that has left many Pakistani shoppers questioning their loyalty to the platform. This shift is creating an unexpected opportunity for local e-commerce marketplaces to reclaim market share it lost to international competitors over the past two years.

The tax tsunami 

Pakistan's 2025-26 federal budget introduced sweeping changes to e-commerce taxation, fundamentally altering the competitive landscape. The new regime imposes an 18% GST on all e-commerce transactions, including foreign platforms, alongside a 5% Digital Presence Levy specifically targeting international operators without local offices.

"There's two new taxes that have been applied on sellers, on marketplaces, one is income tax and one is sales tax. They've imposed 2% on the income tax side and 2% on the sales tax side, so essentially a 4% additional tax has come on," explains Abrar Bajwa, Founder of Zambeel, a logistics company serving Pakistan's e-commerce sector.

In its attempt to widen the tax net, the Federal Board of Revenue (FBR) has introduced a transaction-based tax regime that disproportionately affects Pakistan’s e-commerce and delivery ecosystems. Both online marketplaces and logistics services are now subject to per-transaction taxes, a move that might make sense on paper but has had troubling real-world consequences. By taxing each sale or delivery individually, the system adds financial friction at every point of the customer journey. What was meant to broaden the tax base is instead narrowing the pool of active buyers and sellers.