Islamabad, August 2, 2025 – The Federal Board of Revenue (FBR) has provided a detailed explanation of the new taxation framework introduced for the e-commerce sector under the Finance Act, 2025.
This move is aimed at bringing online sellers into the tax net and ensuring fair tax collection from digital transactions across Pakistan.
In Circular No. 01 of 2025-26 on Saturday, the FBR outlined key amendments to the Income Tax Ordinance, 2001. These changes specifically address the rise in e-commerce activity and the growing number of sellers operating informally through online marketplaces and e-stores.
To address this, the FBR has created a simplified registration process that assigns National Tax Numbers (NTNs) to online sellers. The goal is to ensure tax is collected on all digitally ordered goods and services. A new Section 6A has been added to the law, which states that any payment for goods or services ordered online—whether through a website or online marketplace—will be subject to tax.
In order to enforce this, Section 153(2A) has been updated to implement a withholding tax system. Banks, financial institutions, currency dealers, payment gateways, and couriers are now responsible for deducting tax at the time of payment. The withholding tax rate is 1% for digital payments and 2% for payments made through Cash on Delivery (CoD). The lower tax on digital payments is intended to promote a shift towards a cashless economy.
This collected tax will be treated as final tax under Section 6A for both local and export e-commerce transactions. However, the existing rules under Section 154 and 154A for exports will still apply separately and are not covered by this new framework.
To make the system clear, new definitions have been added to the Income Tax Ordinance. These include terms like e-commerce, digitally delivered services, online marketplaces (OMPs), payment intermediaries, and courier services.
Payment intermediaries (like banks or gateways) and courier services are required to collect this tax in the name of each seller. They must then deposit the tax monthly with the FBR and also file a withholding tax statement that lists all transactions made by each seller using their platform.
It is now mandatory for every e-commerce seller to register with the income tax department. OMPs and courier services are barred from providing services to unregistered sellers. Online platforms must submit regular statements showing the vendors using their service. If any platform or courier fails to collect or deposit tax, or does not ensure seller registration, penalties will be imposed.
Clarifications were also made about who will act as the tax collector in different scenarios:
• If the seller has an e-store or mobile app where buyers make online payments, the acquiring bank will be the payment intermediary and must deduct tax.
• If payment is made through Cash on Delivery, the courier service—whether directly hired, working with the e-store, or an aggregator—must collect and deposit the tax.
• For vendors selling through an Online Marketplace, where payment is made online, the bank or financial institution facilitating payment between the buyer and seller is considered the payment intermediary.
• Importantly, banks involved in the first leg of payment—from buyer to the marketplace—will not be treated as payment intermediaries because the marketplace is acting only as an agent.
The FBR’s new framework is part of a broader push to document the digital economy and increase tax compliance in Pakistan’s rapidly growing e-commerce sector. This structured approach ensures that all stakeholders—sellers, OMPs, payment gateways, and couriers—contribute fairly to the national revenue through transparent digital transactions.