Fiscal Year 2024 was a landmark for Pakistan’s digital transformation. A staggering 84% of retail payments were conducted digitally, up from 76% the year before. Transaction volume leapt from 4.7 billion to 6.4 billion, while value surged from Rs 403 trillion to Rs 547 trillion a phenomenal 35% growth.
E-commerce mirrored this growth: 87% of all online sales were executed via digital channels, with over 309 million transactions worth Rs 406 billion recorded. Mobile and internet banking saw exceptional growth too:
- Mobile banking volume up 70%; internet banking up 30%.
- Combined, these channels processed Rs 70 trillion—a 74% jump from the previous year.
Even wallets saw record-breaking usage. E-money wallet users grew 85%, with total app-based wallet transactions surpassing 2.7 billion.
With such momentum, expectations were high that the new fiscal policies would support, not stifle, this digital leap.
Budget 2025–26: A Taxing Blow to E-Commerce
Contrary to expectations, the 2025-26 budgets have imposed a final withholding tax of 0.25% to 2% on the gross receipts of all digitally ordered goods and services. This tax applies to both digital payments and Cash-on-Delivery (CoD) transactions, and will be collected by banks, wallets, fintechs, and courier services.
Additionally, an 18% sales tax will now be levied on all e-commerce transactions, again enforced through payment platforms and delivery agents.
Without clear laws, proper infrastructure, and industry consultation, these taxes could reverse years of digital progress just when Pakistan's economy needs it most
Implementation Issues Raise Red Flags
The Pakistan Banks Association (PBA) has raised serious concerns over this new framework, calling it unclear, impractical, and rushed. Key issues include:
Undefined tax bands: It’s unclear who falls under what rate and how transactions are to be categorised.
Vague terminology: The term “digitally ordered” lacks definition leaving hybrid sales via WhatsApp, phone, or COD in legal limbo.
Unrealistic obligations: Banks and logistics companies are now expected to register sellers, withhold taxes, and report transaction data to the FBR all without clear infrastructure or timelines.
Without proper IT integration with sellers’ point-of-sale systems, enforcing this tax becomes almost impossible, especially for courier companies handling massive volumes of CoD orders.
Big E-Commerce Platforms to Bear the Brunt
For industry giants like Daraz, Shopsy, and international platforms like AliExpress, the cost implications are significant:
The combined effect of withholding tax (1–2%) and 18% GST could squeeze profit margins or lead to price hikes for consumers.
Compliance complexity will soar: platforms must classify products, track transaction types, and coordinate tax collection across intermediaries.
Foreign vendors now face a 5% tax on gross receipts, prompting many to reassess their presence in Pakistan.
Strategic Consequences
| Area | Insight |
| Higher Consumer Prices | Sellers may pass on the cost of compliance and taxes. |
| Risk of Non-Compliance | Ambiguity may lead to widespread violations. |
| Legal Grey Areas | COD and hybrid transactions aren’t clearly defined. |
| Need for Clear SOPs | Stakeholders need guidelines, phased rollouts, and tech readiness. |
Conclusion: Missed Opportunity or Policy Overreach?
While the government’s intent to broaden the tax net is commendable, the current structure of Budget 2025–26 poses an existential challenge to e-commerce platforms that have only recently found their footing. Without clear laws, proper infrastructure, and industry consultation, these taxes could reverse years of digital progress just when Pakistan's economy needs it most.
For Pakistan to truly benefit from its digital potential, tax reforms must align with technological readiness and business realities. Otherwise, what should have been a budget for growth may well become a roadblock?