In a joint move to address sector-wide concerns, the federal ministries of Commerce and Information Technology & Telecommunication have proposed revisions to the newly announced e-commerce taxation framework included in Pakistan’s federal budget for the financial year 2025-26. The proposal aims to ease compliance pressure on small and medium-sized enterprises (SMEs) and to foster sustainable growth in the country’s digital economy.
The announcement follows the unveiling of the national budget by Finance Minister Muhammad Aurangzeb, who projected a 4.2% GDP growth for FY26. Among the new fiscal measures, the budget introduced significant changes to how e-commerce transactions will be taxed. Specifically, it includes an 18% sales tax on goods sold via digital platforms. The proposed collection mechanism mandates that courier and logistics companies must collect and remit this tax on behalf of e-commerce sellers during the delivery process.
Ministers Jam Kamal Khan and Shaza Fatima Khawaja raised concerns during a high-level meeting about the burden this framework could place on small businesses operating in the digital retail space. The Ministry of Commerce issued a statement clarifying that the meeting focused on mitigating these challenges and ensuring fair compliance structures across the ecosystem. The ministers highlighted the need to balance revenue collection with the development of digital entrepreneurship and the operational realities of SMEs.
According to the Finance Bill 2025, additional measures will affect both digital and cash-on-delivery payments. For digitally ordered goods, consumers will pay 1% tax on payments up to Rs10,000, 2% on payments between Rs10,001 and Rs20,000, and 0.25% on amounts above Rs20,000. In the case of cash-on-delivery, tax rates vary by category: 0.25% on electronics, 1% on clothing, and 1% on other items.
The rapid expansion of Pakistan’s e-commerce market—valued at $7.7 billion in 2024 and expected to grow at 17% CAGR through 2027—has prompted calls for more nuanced policy approaches. Recognizing the pace and complexity of the digital commerce sector, Minister Kamal Khan also announced the formation of a joint working group involving the Ministry of IT. This body will present policy recommendations on taxation, vendor registration, and digital payment systems to the prime minister for review.
The working group’s feedback is intended to support the finalization of the long-awaited eCommerce Policy 2.0, which is currently in the final review stage before cabinet submission. The policy is expected to offer a comprehensive framework for digital trade, vendor onboarding, taxation clarity, and payments integration.
The Finance Bill also broadens the definition of “e-commerce” to include any sale or purchase of goods and services conducted over digital networks. This includes mobile applications, websites, and automated systems designed for digital order processing, reinforcing the government’s intention to bring all digital transactions into a uniform regulatory scope.
