Islamabad, June 17, 2025: In a significant move to digitize the economy, the federal government has revised its proposal for income tax on cash-on-delivery (COD) payments, making it higher than tax rates on digital transactions.
The announcement came during a National Assembly Standing Committee on Finance meeting, where Minister of State for Finance Bilal Azhar Kayani confirmed that separate tax rates will apply to COD and digital payments. The goal is to discourage cash use, curb undocumented trade, and promote digital transactions across Pakistan.
The Federal Board of Revenue (FBR) initially floated tax rates ranging between 0.25% and 2% on COD transactions. With the revised model, the tax burden on COD will be steeper, signaling a strong push towards online payment systems. This measure is expected to generate Rs. 59 billion in revenue for fiscal year 2025-26.
Despite the economic rationale, several lawmakers—led by Committee Chairman Syed Naveed Qamar—voiced concerns about the practical impact on small businesses. They emphasized the need for clear thresholds and safeguards to ensure that small sellers and startups aren’t disproportionately affected by the new tax policy.
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The FBR has been urged to adopt a balanced approach that promotes digitization while protecting the backbone of Pakistan’s e-commerce sector. As digital transactions continue to rise, this tax reform could mark a turning point in how the country handles retail trade and taxation.
