The Chainstore Association of Pakistan has voiced strong reservations over several retail and e-commerce tax provisions included in the Finance Bill 2025-26. CAP has warned that some of the proposed compliance-heavy measures could disrupt the momentum of Pakistan’s digital economy and harm tax-compliant retailers that have already integrated with FBR’s Point of Sale system. While the association supports the government’s objective to expand the tax net and formalise economic activity, it has called for a consistent and consultative approach to policy design.
CAP emphasized that retailers had hoped for a strategic, long-term vision in this year’s budget, but the Finance Bill has repeated several past measures without addressing core sector challenges. CAP Chairperson Asfandyar Farrukh said that proposals from the retail industry to support documentation and formal sector growth were overlooked during budget formulation. The absence of a stable three-to-five-year taxation roadmap has continued to generate uncertainty among retailers.
Despite contributing to documentation and employment, organised retail accounts for just 10 per cent of Pakistan’s total retail and wholesale trade. CAP noted that this figure is significantly lower than the 15–20 per cent seen in peer economies. The association attributes this gap to unbalanced enforcement, informal competition, and rising compliance obligations. CAP Patron-in-Chief Tariq Mehboob recalled that the withdrawal of GST concessions for customers of compliant retailers last year had already weakened the sector’s competitiveness. He further criticised the Tajir Dost scheme, noting that a lack of stakeholder consultation led to limited adoption.
To boost digital payments and encourage documentation, CAP proposed a lower GST rate for consumers using digital transaction channels, regardless of business size. The association argued that simplified mechanisms, supported by provincial incentives, could lower compliance costs and help shift the economy away from cash-based transactions. CAP also suggested a fixed, quarterly advance income tax regime for small retailers that would be payable via branchless banking and adjustable against annual filings. Additional proposals included fast-track services at NADRA and passport offices and cashback-based incentives to encourage voluntary SME registration.
Data from the State Bank of Pakistan cited by CAP shows that e-commerce in the country is expanding by more than 35 per cent annually, involving over 100,000 small sellers and generating over Rs538 billion in digital payments in 2024. CAP welcomed policy advances such as a 5.0 per cent digital presence levy on imported goods sold through platforms like Temu and the introduction of transaction-level reporting. However, it raised concerns about other measures in the Finance Bill, particularly blanket sales tax withholding without input tax adjustment, mandatory sales tax registration for micro-sellers, and a multi-rate income tax withholding framework targeting digital platforms, PSPs, and courier services. CAP warned that these proposals would increase operational costs, slow down payment recovery, and introduce bottlenecks across the value chain.
In its statement, CAP urged the Ministry of Finance, FBR, and Ministry of Commerce to delay implementation of these proposals and open consultations with digital businesses, online sellers, and service providers. CAP’s key recommendations include restricting 2.0 per cent sales tax withholding to non-ATL sellers, accepting income tax registration for small online sellers as sufficient, applying a flat 0.25 per cent withholding tax rate, and offering a transition period of two to three months for implementation. The association also called for rationalisation of provincial taxes on digital services and a more constructive penalty structure to promote long-term compliance and trust among businesses.
