GR Chainstore Association of Pakistan (CAP) and Pakistan E-Commerce Association (PEA) representing a broad group of stakeholders such as online retailers, freelancers, market places, logistics companies, payment providers, and digital services providers, have requested the government to reconsider several harsh taxation and compliance measures recommended in the Finance Bill of fiscal year 202526.
The e-commerce industry in Pakistan has been growing at an average rate of over 35% in the past few years and presently serves several thousand micro and small-scale online sellers, employing over one million individuals in the country. Although the sector is experiencing healthy growth, its market share is less than 2 percent of the national GDP, compared with that of its regional counterparts.
Although the industry recognizes the necessity of fair taxation and a transparent environment, it warns that the suggested tax structure, which is defined by the ability to start in the quickest possible way and has its intense compliance demands, is likely to hinder growth and innovation processes. Its non-progressive adoption over a period, and from a perspective of insignificant stakeholder engagement, endangers access to digital entrepreneurship, particularly for susceptible populations, including women and young entrepreneurs.
The coalition favors specific proposals, including the introduction of a 5 percent digital presence tax on foreign companies like Temu and higher Verifiable Data Reporting standards. Nevertheless, it also states that such developments should not be counteracted by excessively complex tax regimes that hinder the sector’s growth.
Some of the issues that have been noted are mandatory sales tax withholding obligation of 2 per cent without an input tax credit system, obligatory sales tax registration of all internet merchants irrespective of their size or location, income tax withholding at varying rates (between 0.25 per cent and 2 per cent), and fines of up to Rs. 500,000 on digital platforms, couriers, and buyers. The fact that the government will implement these regulations as of July 1 without providing an adequate transition period exacerbates these difficulties even further.
To counter these risks, the e-commerce coalition suggests:
Putting a condition that only unregistered sellers (non-ATL) withhold 2% of the sales tax.
– A simplified way to register your new way of selling by just registering for income tax only under small-scale and home-based resellers.
Composition of withholding tax to a minimum rate of 0.25 percent.
Bringing the sanctions to the level of proportionality and reasonability.
– Refurbishing and restructuring of provincial taxes on basic digital services like online advertisement and web hosting.
– Implementing a compulsory transition of two to three months to have time to be ready to comply.
Industry representatives have written to the Prime Minister, Finance Minister, Commerce Minister, and Federal Board of Revenue (FBR) to postpone the implementation of these tax measures and to establish an open dialogue to co-develop effective and growth-friendly taxation policies.
They reiterated that they were ready to contribute to the government’s revenue targets while also supporting a balanced tax environment that fosters Pakistan’s digital economy and enables its entrepreneurs.
