The Federal Board of Revenue (FBR) has introduced new procedures to regulate the registration of e-commerce sellers and tax digital transactions, aiming to bring the retail sector under the tax net. The FBR has issued Income Tax Circular No. 01 and Sales Tax Circular No. 02 to facilitate the registration of e-commerce retailers and implement a withholding tax (WHT) system for digital transactions.
Under the new rules, all payments made for digitally ordered goods or services — whether through online marketplaces (OMPs) or websites — will be subject to tax.Â
Section 6A of the tax code now covers domestic e-commerce transactions, while payment intermediaries, including banks, financial institutions, forex dealers, and digital gateways, are required to withhold a 1% tax on such transactions.
Couriers involved in cash-on-delivery (CoD) transactions will deduct a 2% tax before transferring payments to the sellers. This tax structure aims to promote digital payments and support the shift towards a cashless economy.
The tax collected under Section 6A will be treated as a final tax on income earned from both domestic and export sales. Payment intermediaries and couriers are responsible for collecting and depositing this tax monthly into the national treasury, as well as submitting the required statements.
As part of the new regime, e-commerce sellers are required to register for income tax, and OMPs and courier services are prohibited from serving unregistered sellers. OMPs must also file periodic reports on the vendors operating on their platforms. Penalties will apply for non-compliance, including fines for failing to withhold tax or meet registration requirements.
For CoD-based vendors, courier services are responsible for tax collection and reporting, regardless of whether the vendor operates through an OMP or independently. Under the sales tax framework, couriers are designated as withholding agents to capture taxable activity in the e-commerce sector.
The government has introduced further provisions to ensure sales tax compliance. Tax collected by intermediaries and couriers on digitally ordered goods will be treated as the final liability for cottage industries and non-tier-1 retailers. Other businesses will continue under the standard sales tax system, where withheld tax can be adjusted against output tax.
Additionally, amendments to Sections 14(1A) and 14(1B) require all e-commerce vendors, including non-residents selling goods digitally in or from Pakistan, to register and comply with the sales tax framework. OMPs, payment intermediaries, and couriers are also required to file monthly sales tax statements with detailed supplier-wise payments and tax dues.
