The Federal Board of Revenue (FBR) has imposed a Rs 200,000 limit on cash-based transactions at retail outlets and for Cash on Delivery (CoD) orders in the e-commerce sector.Â
The decision, announced in Circular No. 02 of 2025-26 (Income Tax), is part of the government’s broader effort to promote a cashless economy.
The circular reiterates that the same transaction limit applied to retail outlets will now be extended to e-commerce CoD orders, under section 21(s) of the Income Tax Ordinance, 2001. This move is aimed at streamlining cash transactions in both markets and online platforms.
Earlier, the FBR 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.
