Islamabad 8 August: The Federal Board of Revenue (FBR) has rolled out a sweeping new policy enforcing sales tax on all online orders, including cash-on-delivery (COD) transactions, as part of a bold move to regulate Pakistan’s booming e-commerce sector.
Announced through amendments to the Sales Tax Rules, 2006, the measure requires online marketplaces, courier companies, and payment agents to deduct and remit the tax, marking a significant shift to formalize digital commerce and widen the tax net.
Under the updated regulations, effective immediately, a sales tax—set at a standard rate with a 2% deduction for COD orders—must be collected at the point of purchase, even for cash payments upon delivery. These funds are to be deposited with the FBR by the 10th of each month.
To ensure compliance, the FBR has introduced three mandatory reporting forms: STR-34 for marketplaces to detail orders and vendors, STR-35 for a general monthly tax return, and STR-36 for courier services acting as marketplaces. Additionally, couriers and payment processors must issue tax deduction certificates to vendors, enhancing traceability in digital transactions.
The policy aims to close a long-standing loophole that allowed many online vendors to evade taxation, with the FBR estimating significant untapped revenue from the sector. However, the move has sparked mixed reactions.
Proponents argue it will boost transparency and align Pakistan with global digital tax trends, while critics, including some e-commerce stakeholders, warn that the sudden enforcement could burden small sellers and raise consumer costs, potentially stifling industry growth. The 2% COD tax, in particular, has raised concerns about its impact on affordability in a market where cash transactions dominate.
The FBR’s crackdown extends beyond e-commerce, with parallel amendments to the Export Facilitation Scheme affecting textile exporters by removing tax exemptions on cotton-related goods and accepting insurance guarantees over bank guarantees.
READ MORE: FBR Launches New E-Tax Return Form
This dual approach reflects a broader push to tighten fiscal controls, though some question whether the timing—amid economic recovery efforts—might overburden businesses already navigating high operational costs. As enforcement begins, the effectiveness of this policy will hinge on clear implementation and support for affected vendors, leaving the digital economy at a pivotal juncture.
