ISLAMABAD: The country’s Online Marketplaces (OMs) have responded angrily to the planned revisions in the Sales Tax Act 1990, fearing that the majority of enterprises would relocate away from these online selling platforms, giving rise to unregistered vendors.
The Finance Bill sought to classify OMs as “Tier 1 Retailers,” subjecting all transactions performed through these platforms to a 17 percent tax.
The online sale platforms, on the other hand, argue that authorities must distinguish between online sale platforms and physical sale shops. In the country, there are more than 17 platforms that function as “online markets,” selling a diverse range of products from s
“The OM business model is used in e-commerce all around the world. This helps empower small and medium businesses, encourages company digital transformation, and develops a sustainable digital ecosystem,” stated Daraz Group Vice President Muhammad Imran Saleem.
The seller retains ownership of the products under the OM model, not the Online Marketplace. While each seller has their own ratings, all customers may view the seller’s performance and dependability in order to make an informed purchase decision.
The onus and burden of collecting and depositing sales tax (as an output tax) has been placed on the online marketplace industry under the current proposed amendment to the sales tax.
For all taxable commodities processed through their platforms, the OMs will need to start issuing sales tax bills on their books. The OM platforms will receive sales tax invoices from registered sellers, which they will be required to claim as input tax in their tax returns.
Due to the unregistered nature of the suppliers, OM platforms will not be able to claim input tax on invoices from unregistered sellers.
“Currently, the mechanics of input claims are unclear because products are subject to numerous tax rates, which the seller would have charged to an online marketplace,” Mr Saleem said, adding that the net difference would be borne by the online marketplaces.
He argued that online market platforms in Pakistan were still in their infancy, and that the new restrictions would lead to an increase in unregistered online merchants, culminating in customer marketing fraud. On such platforms, consumers may lose quick access to a large number of goods available across categories.