The federal government has officially removed the 5 percent tax that was introduced on foreign digital platforms supplying goods and services to Pakistani consumers. This decision, effective from July 1, 2025, is expected to offer partial relief to online shoppers who have seen a noticeable increase in prices on platforms like Temu, SHEIN, and AliExpress following the recent budget announcements.
The change comes through a notification issued by the Federal Board of Revenue, which stated that under section 15 of the Digital Presence Proceeds Tax Act, 2025, the tax will no longer apply to foreign companies providing digitally ordered goods and services to Pakistan. The rollback is expected to reduce the final cost of imports purchased through these platforms, although full price normalization may still not be achieved due to the continued imposition of an 18 percent sales tax.
The initial tax policy, introduced in the fiscal year 2025–26 budget, aimed to generate revenue from international companies operating in Pakistan’s digital marketplace. However, the inclusion of online retail giants in the scope of the tax had a direct impact on end-user prices. Consumers purchasing fashion items, electronics, home accessories, and other products from cross-border platforms began experiencing higher prices in early July.
According to officials familiar with the development, the tax rollback is aligned with broader trade negotiations involving the United States. It is also seen as part of efforts to streamline digital commerce, reduce the cost burden on consumers, and support access to affordable global products in the local market.
While the removal of the 5 percent levy marks a step toward easing digital trade flows, the remaining 18 percent sales tax continues to keep prices above pre-budget levels. The government has not announced any changes regarding the sales tax component. This means that although the effective tax burden on foreign digital retailers has reduced, consumers are likely to see only marginal drops in checkout prices.
E-commerce in Pakistan has grown significantly over the past few years, with consumers increasingly relying on global platforms for product variety, pricing, and access to goods not readily available in the domestic market. Platforms like SHEIN, Temu, and AliExpress have developed strong user bases, particularly among younger shoppers. The revised tax policy may help stabilize this segment and avoid a decline in cross-border digital commerce caused by price inflation.
The decision also reflects an ongoing balancing act for the government as it tries to broaden the tax net while keeping international trade relationships intact and digital commerce accessible. As digital retail continues to expand and consumer expectations evolve, tax policies on cross-border transactions will likely remain an area of active review.
