FBR enforces at-source sales tax collection through payment platforms, couriers

The Federal Board of Revenue (FBR) has implemented a new mechanism requiring sales tax on digitally ordered goods to be deducted at source to improve tax collection in the e-commerce sector.

Under the system, intermediaries including payment intermediaries, courier companies and online marketplaces will act as withholding agents. They will deduct sales tax from payments made to suppliers and deposit the collected amount with the FBR.

According to the FBR, the system automatically calculates the applicable sales tax as a percentage of the invoice value submitted by the supplier.

To facilitate implementation, the FBR has issued a user manual outlining procedures for payment intermediaries, courier services and online marketplaces. The manual provides guidance on fulfilling statutory obligations through the IRIS system, including creation of e-payments, generation of Payment Slip IDs and Computerized Payment Receipts, submission of monthly withholding statements and claiming of admissible sales tax credits.

The FBR said the framework aims to ensure compliance, improve reporting accuracy and standardise procedures across all stages of sales tax withholding on digitally ordered goods.

Under the reporting structure, payment intermediaries and courier services are required to withhold and report sales tax only on the amounts they collect or settle. Their monthly withholding statements are auto-populated from the relevant payment and receipt data.

In contrast, online marketplaces will submit monthly statements reflecting the aggregate value of all transactions conducted on their platforms, including those processed through payment intermediaries and courier services. These statements will be generated based on the data submitted by the respective intermediaries.