Government Proposes Revisions to Support Pakistan’s E-commerce Sector

In an effort to bolster Pakistan’s rapidly expanding e-commerce sector and provide assistance to small and medium-sized enterprises (SMEs), Federal Minister for Commerce Jam Kamal Khan and Federal Minister for IT and Telecommunication Shaza Fatima Khawaja have suggested crucial changes to the government’s taxation and regulatory structure.

This development took place during a high-profile meeting convened to tackle significant challenges within the e-commerce industry, according to a statement issued by the Ministry of Commerce on Thursday.

“Aligned with the upcoming policy’s collaborative strategy, Commerce Minister Kamal Khan declared the establishment of a joint working group, incorporating input from the IT Ministry, to compile extensive recommendations on taxation, vendor adherence, and digital payment methods,” the statement noted.

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The group’s conclusions will be formally presented to Prime Minister Shehbaz Sharif for ultimate assessment.

In its budget presentation for fiscal year 2025-26 on Tuesday, the federal government revealed a 5% withholding tax on payments to both domestic and international digital vendors (such as Amazon, Google, Facebook, Netflix, Daraz, Temu, PakWheels) for goods or services provided to Pakistani consumers.

Furthermore, a standard VAT of 18% is being proposed for online marketplaces that facilitate the sale of goods and services (for example, Daraz, OLX, Zameen, PakWheels). This measure is intended to standardize tax procedures and address revenue shortfalls, particularly for platforms operating as intermediaries.

Concurrently, during the meeting on Thursday, Kamal affirmed that E-commerce Policy 2.0 is in the final stages of internal evaluation and will soon be submitted for cabinet approval.

Pakistan’s e-commerce sector has seen substantial expansion, achieving a market size of $7.7 billion in 2024, with forecasts indicating a 17% compound annual growth rate through 2027.

The ministers reaffirmed their dedication to cultivating an inclusive, competitive, and digitally empowered trade environment, ensuring that emerging challenges are addressed at the highest levels.