ISLAMABAD – In a decisive move to formalize Pakistan’s booming e-commerce sector, the Federal Board of Revenue (FBR) has launched a nationwide crackdown targeting online sellers operating without tax registration.
Effective immediately, any business selling goods or services online without being registered with the FBR is now barred from operating. The directive covers individuals and companies alike, and enforcement is being carried out through banks, courier services, and digital marketplaces, which have been instructed to cut off all unregistered entities.
This isn’t just policy — it’s law. The new measures are anchored in recent amendments to the Income Tax Ordinance and Sales Tax Act, and they aim to close long-standing loopholes that allowed thousands of online sellers to operate under the radar.
New Tax Rules Redefine Online Commerce
Under the updated regulations:
- 1% tax will be automatically deducted on all digital payments processed through banks, fintech apps, or payment gateways.
- 2% tax will apply to all cash-on-delivery (COD) transactions, collected by courier companies at the point of delivery.
These withholding taxes are now mandatory and will be deducted before any funds reach the seller.
Moreover, the courier and logistics sector has essentially been deputized to serve as tax enforcement agents. Delivery companies are now legally required to:
- Verify whether sellers are tax-registered,
- Deduct applicable taxes at source,
- File monthly returns on behalf of these transactions,
- And maintain transaction-level data for FBR audits.
Non-compliance could result in serious penalties, audits, or even forced closure of operations.
No Registration, No Business — Even for Global Sellers
One of the most notable elements of this overhaul is its extraterritorial reach. Foreign-based sellers that offer products or services to Pakistani consumers must now also register with the FBR. This applies to platforms operating from abroad, such as global e-commerce sites or app-based businesses shipping into Pakistan.
Amendments to Sections 14(1A) and 14(1B) of the Sales Tax Act ensure that every e-commerce entity—domestic or international—falls within the scope of Pakistan’s tax system.
Sales Tax Changes Hit Small Sellers Hardest
For smaller online retailers, the new tax policy comes with a catch: sales tax collected at the point of transaction will be treated as final liability, with no option to claim input tax credits. This could raise costs for smaller sellers who rely on thin margins and have limited financial cushion to absorb taxes without offsetting them against expenses.
What This Means for the E-Commerce Landscape
Industry analysts say this could mark a turning point for Pakistan’s digital economy. On one hand, formalization may lead to a more transparent, structured, and fair marketplace. On the other, the speed and scale of enforcement could disrupt operations for thousands of small sellers, many of whom operate informally and are unfamiliar with tax compliance procedures.
The FBR, for its part, has signaled that it will not back down. Monthly tax reports will now be required from online marketplaces, courier services, and payment processors, listing every seller, transaction, and deduction made.
In short, the FBR has drawn a clear line in the sand: no tax registration, no access to Pakistan’s e-commerce ecosystem.
Whether this move empowers the digital economy or stifles it remains to be seen—but for unregistered sellers, the clock has already run out.