ISLAMABAD: Federal Board of Revenue has implemented a new mechanism to strengthen tax collection from Pakistan’s expanding e-commerce sector by introducing source based sales tax withholding on digitally ordered goods. Under the updated framework, intermediaries including payment intermediaries, courier companies and online marketplaces are now designated as withholding agents responsible for deducting sales tax at the time of payment settlement and depositing it with FBR. The move is aimed at improving documentation, enhancing transparency and ensuring more consistent compliance in online commercial transactions.
According to FBR, the system automatically calculates the applicable sales tax as a percentage of the invoice value submitted by the supplier. Intermediaries are required to deduct the tax at source from payments made to vendors and remit the collected amount through the IRIS platform. To support implementation, FBR has issued a detailed user manual outlining the operational process for payment intermediaries, courier companies, online marketplaces and other relevant stakeholders. The manual provides guidance on generating e payments, creating Payment Slip IDs, obtaining Computerized Payment Receipts, submitting monthly withholding statements and claiming admissible sales tax credits. Through these measures, FBR intends to standardize procedures and minimize reporting discrepancies across the digital commerce ecosystem.
The tax authority has clarified that payment intermediaries and courier services are only responsible for withholding and reporting sales tax on amounts they directly collect or settle. Their monthly withholding statements will reflect transactions processed through their respective systems, and these statements will be auto populated from CPR data generated during payment processing. This automated reporting structure is designed to improve accuracy and reduce manual intervention in tax documentation. By integrating withholding data with IRIS records, FBR aims to ensure that deductions are properly recorded and reconciled within the broader tax administration framework.
In contrast, online marketplaces will submit monthly statements reflecting the aggregate value of all digitally ordered transactions conducted on their platforms. These statements will include payments processed via payment intermediaries as well as courier services, as they are compiled on the basis of monthly submissions made by those entities. FBR stated that the objective of the new system is to empower withholding agents to manage sales tax obligations with clarity, efficiency and consistency while contributing to a more reliable and coordinated e-commerce taxation structure. The initiative forms part of broader efforts to formalize digital trade, improve revenue collection and enhance procedural compliance within Pakistan’s online retail landscape.
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