In a bid to broaden its revenue base and address the fiscal deficit, the Government of Pakistan is considering the introduction of new taxes on online shopping as part of the forthcoming Budget 2025–26. According to The News, the Federal Board of Revenue (FBR) is working on proposals to bring the fast-growing e-commerce sector under the tax net, reflecting the increasing prominence of digital commerce in Pakistan’s urban economy.
Online shopping has rapidly become a preferred mode of consumption, especially among middle and upper-income households in major cities. Despite its growth, this sector remains largely untaxed. FBR is now examining the potential of implementing general sales tax (GST) on online transactions, with mechanisms designed to streamline tax collection at different points of the transaction process.
One key proposal under review suggests deducting 3% tax at the time of delivery — particularly for cash-on-delivery (COD) orders. In this model, delivery service providers would be responsible for collecting this portion of GST on behalf of FBR and depositing it into the national treasury. The remaining 15% GST would be incorporated into the product’s cost by the manufacturer or seller.
This initiative coincides with ongoing virtual discussions between Pakistan and the International Monetary Fund (IMF), which began today. The talks are aimed at finalizing the structure of Budget 2025–26 and agreeing on strategies to manage public spending while increasing tax revenue. A central objective of the discussions is to ensure Pakistan meets its commitment to limiting the budget deficit to 5.1% of GDP in the next fiscal year.
Historically, Pakistan’s attempts to expand the tax base—particularly among traditional retailers—have faced repeated challenges. The Tajir Dost Scheme, launched to encourage shopkeepers to register and pay taxes, has not produced the desired results. In response, the government is now targeting the digital retail segment, which is both growing and relatively easier to monitor due to its digital nature.
Additionally, FBR is studying the feasibility of imposing federal excise duty (FED) on local purchases made via debit and credit cards. While international transactions made through cards are currently taxed under FED, domestic digital purchases have largely escaped such scrutiny. By tightening regulations in this area, the government hopes to plug tax leakages and harness the full potential of the digital economy.
FBR insiders confirmed that various tax proposals related to e-commerce will be shared with the IMF during the ongoing budget negotiations. Among the most significant is the proposal to legally mandate e-commerce platforms, including those operating as digital marketplaces without direct ownership of inventory, to collect and remit sales tax on all transactions.
Despite the government’s enthusiasm, tax experts have voiced concern over the timing and implications of these measures. They argue that taxing online shopping could hinder the growth of Pakistan’s still-developing e-commerce ecosystem. Increased compliance burdens and higher prices may deter small businesses from transitioning online and could lead to decreased digital adoption among consumers.
Nonetheless, FBR officials maintain that delaying taxation could result in long-term challenges. As digital commerce becomes more entrenched in consumer behavior, implementing taxation at a later stage may prove difficult. The current growth phase, they argue, presents an opportunity to formalize and regulate the sector effectively.
With Pakistan’s budget announcement drawing closer, all eyes will be on how the government balances the need for increased revenue with the imperative to nurture the country’s emerging digital economy.
