New Taxes on E-commerce Transactions in Pakistan: In the recent budget (Finance Act 2025) Government of Pakistan has taken some significant steps towards the taxation of local ecommerce industry of Pakistan. The new amendments in the Income tax Ordinance 2001 and Sales Tax Act 1990 will affect all those ecommerce businesses operating through online platforms, websites, or courier based Cash on Delivery (COD) Model.
Below are the significant highlights of amendments in tax laws of Pakistan which are necessary for your understanding:
Enhanced Definition of “Online Market Place”
Through Finance Act 2025, section 2(38B) of income Tax Ordinance 2001 amended and definition of “Online Market Place” has been broadened. It now also includes:
- any online platform,
- interface,
- or software
These will help buying and selling between multiple parties, whether the platform owns the goods/services or not.
New Taxes on E-commerce Transactions in Pakistan for Digitally Ordered Goods/Services
Through Finance Act 2025, a new section, 6A in the Income Tax Ordinance, introduces a tax on payments received for digitally ordered goods/services through local platforms (including websites).
Applies To:
This section applies to all persons receiving payments for goods/services delivered from within Pakistan via online platforms.
Excludes:
It does not include export proceeds received in Pakistan which are already taxed under sections 154 and 154A.
Tax Collection by Payment Intermediaries and & Couriers
Under amendment in section 153(2A) of Income Tax Ordinance 2001 through Finance Act 2025:
- Every Payment intermediary (e.g., banks, payment gateways) against digitally ordered goods must deduct tax at the time of processing digital payments on behalf of e-commerce sellers.
- Moreover every Courier service provider collecting payments through cash on deliver (COD) terms of goods digitally ordered on behalf of ecommerce sellers must also collect tax from the gross amount payable (including sales tax, if any) to the seller.
This applies to all payments made for digitally ordered goods and services via local platforms, including websites.
Rate of Income tax to be deducted from a payment for digitally ordered goods/services
Two different tax rates has been introduced for payments to ecommerce sellers against digitally ordered goods, complete description is here:
- If payment against digitally ordered goods/services are made through digital means or banking channels by payment intermediary then the tax deduction will be at the rate of 1% of gross amount paid or payable;
- Cash on Delivery by courier service at the rate of 2% of gross amount paid or payable
Sales Tax Collection Responsibility
As per Sales Tax Act 1990, the responsibility to collect and pay sales tax on digitally ordered goods is explained here:
- Payment intermediaries: For digital payments, responsibility to collect and deposit in the government treasury will be on the “payment intermediaries”, including a banking company, a financial institution, licensed exchange company or payment gateway.
- Courier companies for CoD transactions the responsibility will be on the courier companies delivering the goods on Cash on Delivery (COD) basis.
Rates of Sales Tax on Payments against Digitally ordered goods
The applicable rates of sales tax to be deducted are given in the Eleventh Schedule of the Sales Tax Act 1990.
The sales tax withheld by the payment intermediary or the courier company will be final discharge of tax liability against the digitally ordered goods by the:
- Cottage Industry as defined in the sales tax Act 1990
- Retailers other than the tier-1 retailers
AS per the eleventh schedule of Sales Tax Act 1990 the rate of sales tax to withhold to withhold by the payment intermediary / Courier Company will be at the rate of 2% of gross value of supplies.
Mandatory NTN & Sales Tax Registration
To promote documentation and transparency:
- All online marketplaces and couriers must ensure that sellers using their services:
- Have a valid National Tax Number (NTN)
- Are registered for sales tax, where applicable (other than cottage industry and retailers who are required to pay sales tax through electricity bills)
Unregistered sellers will not be allowed to operate on their platforms.
