Operator of online market place to withhold sales tax

Operator of online market place to withhold sales tax

ISLAMABAD: The operator of the online market place has been made liable to withholding sales tax on sales of goods.

An important amendment has been made through Tax Laws (Third Amendment) Ordinance, 2001, which was promulgated on September 15, 2021 through a presidential order.

A new proviso has been inserted to Section 3 of the Sales Tax Act, 1990 to make an operator of market place to withhold sales tax.

The text of the new proviso is:

“Provided that in case of the online market place facilitating the sale of third party goods, the liability to withhold tax on taxable supplies of such party at the rates specified in column (4) against S. No. 8 of the Eleventh Schedule to this Act, shall be on the operator of such market place.”

According to the Eleventh Schedule of the Sales Tax Act, 1990, the online market place shall collect from persons other than active taxpayers the withholding sales tax at the rate of 2 per cent of gross value of supplies:

Provided that the provisions of this entry shall be effective from the date as notified by the Board [Federal Board of Revenue].

A new clause 18A was inserted to Section 2 of the Sales Tax Act, 1990 through Finance Act, 2021 to bring online market place under sales tax ambit.

The text of clause 18A is:

“(18A) online market place: includes an electronic interface such as a market place, e-commerce platform, portal or similar means which facilitate sale of goods, including third party sale, in any of the following manner, namely:–

(a) by controlling the terms and conditions of the sale;

(b) authorizing the charge to the customers in respect of the payment for the supply; or

(c) ordering or delivering the goods.”

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