E-commerce Taxation Framework to be Revised

The federal ministries for Commerce and Information Technology & Telecommunication have jointly proposed adjustments to the taxation framework initially outlined for the e-commerce sector in the fiscal year 2025-26 budget.

Finance Minister Muhammad Aurangzeb presented Pakistan’s federal budget 2025-26 on Tuesday, emphasizing a “competitive economy” with a target of 4.2% growth for the upcoming fiscal year, compared to the anticipated 2.7% in the current FY25.

The government’s budget proposals included the imposition of taxes on e-commerce, prompting federal ministers Jam Kamal Khan and Shaza Fatima Khawaja to advocate for a revision to bolster the nation’s e-commerce industry and small and medium-sized enterprises (SMEs).

The ministers addressed various facets of e-commerce during a high-level discussion, aiming to tackle critical issues within Pakistan’s rapidly growing e-commerce landscape, according to a statement released by the Ministry of Commerce on Thursday.

Changes to E-commerce Taxation

Aurangzeb had previously announced an 18% sales tax on goods sold through e-commerce platforms.

He stated that the rise of online businesses and digital marketplaces presents obstacles for conventional businesses that adhere to tax regulations. To promote fairness and ensure adherence to tax laws, courier and logistics providers delivering for e-commerce platforms may be required to collect and remit an 18% sales tax from these platforms.

As per the Finance Bill 2025, the Finance Ministry has suggested a tax ranging from 0.25% to 2% on payments for digitally ordered goods or services through e-commerce platforms, including websites.

The tax would also apply to cash-on-delivery payments handled by courier services.

Consumers could face a 1% tax on gross payments up to Rs10,000 via digital platforms like online and mobile banking. Payments between Rs10,001 and Rs20,000 could be taxed at 2%. A 0.25% tax may be levied on amounts exceeding Rs20,000.

Similarly, a 0.25% tax could be applied to electronic and electrical goods purchased via cash on delivery. Clothing items could be taxed at 1%, while other goods could also incur a 1% tax on cash-on-delivery purchases.

The Commerce Ministry noted that Pakistan’s e-commerce sector has expanded rapidly, reaching $7.7 billion in 2024, with projections indicating a 17% compound annual growth rate through 2027.

Future E-commerce Policy

Minister Kamal Khan announced the creation of a joint working group, in accordance with the upcoming e-commerce policy’s consultative approach. The IT ministry will provide input to gather recommendations on taxation, vendor compliance, and digital payments. The group’s conclusions will then be submitted to the prime minister.

Minister Kamal also mentioned that eCommerce Policy 2.0 is undergoing final internal review before submission for cabinet approval.

The finance bill specified that “e-commerce” encompasses the sale and purchase of goods and services via computer networks, utilizing methods designed for order placement through websites, mobile apps, or online marketplaces with digital ordering features, using mobile phones, automated computer-to-computer systems, or similar devices.