Hajra Naz
Pakistan’s e-commerce and retail sectors are pushing back against new tax measures proposed in the Finance Bill 2025–26.
Two key groups—the Chainstore Association of Pakistan (CAP) and the Pakistan E-Commerce Association (PEA)—have joined forces with a wide range of digital economy players to call for immediate changes. This coalition includes
- Formal retailers
- Freelancers
- Online sellers
- Marketplaces
- Courier companies
- Payment providers
- Digital platforms.
A Growing Sector at Risk
E-commerce in Pakistan has been growing fast, at over 35% annually for the past five years. Today, more than 100,000 small and micro online sellers operate across the country. Together, they help support incomes for over one million people.
The industry’s total market size is estimated at Rs. 2.2 trillion (about $7.7 billion). Despite this growth, it still makes up less than 2% of Pakistan’s GDP, far behind neighboring countries.
Fair Taxation, Not Over-Regulation
The coalition agrees that taxation and documentation are important. But they warn that the new tax policies could do more harm than good.
Their main concern is the lack of consultation and the sudden enforcement. The Finance Bill includes multiple taxes and complex procedures that will hit all parts of the digital ecosystem without giving businesses time to prepare.
Industry leaders say this rushed, top-down approach could seriously damage both large platforms and small, home-based sellers. Many fear it will stifle innovation, especially for young entrepreneurs and women who rely on flexible online work.
Read more: Budget 2025 Could Collapse Pakistan’s IT Sector, Says P@SHA
Support for Digital Levy, But Not Burden
Stakeholders have welcomed some steps in the bill. They support the 5% digital presence levy on offshore companies like Temu and back stronger data reporting rules for platforms.
However, they believe these positive moves are being overshadowed by impractical tax requirements. These include:
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2% sales tax withholding on all transactions, even for registered sellers, with no input adjustment allowed.
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Mandatory sales tax registration for all sellers, including small and home-based businesses.
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Six different income tax withholding rates, ranging from 0.25% to 2%.
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Heavy penalties, up to Rs. 500,000, for platforms, couriers, and sellers if they fail to comply.
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No transition period, with all rules set to take effect from July 1st.
Could Drive Sellers Back Into Informality
CAP and other industry leaders argue that instead of encouraging formal business practices, these rules may have the opposite effect.
Many small sellers may go back to unregistered or cash-based operations, while others may be forced to shut down altogether. The new policy, they say, risks repeating the mistakes of past initiatives like the failed “Tajir Dost” scheme, which collapsed due to poor design and lack of consultation.
Industry Recommendations
To avoid damaging the sector, the coalition has suggested several practical steps:
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Apply the 2% sales tax withholding only to unregistered sellers (non-ATL).
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Simplify tax rules for home-based and small sellers, requiring only income tax registration, not sales tax.
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Use one flat rate of 0.25% for income tax withholding instead of multiple rates.
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Rationalize penalties to be fair and proportionate.
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Reform provincial taxes on essential digital services like online ads and hosting.
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Allow a 2–3 month transition period to help businesses adjust.
A Call for Dialogue, Not Disruption
The e-commerce coalition has sent direct appeals to the prime minister, finance minister, commerce minister, and the FBR.
Their message is clear: pause the rollout of these new measures and talk to stakeholders before moving forward. They remain open to working with the government on tax reforms that make sense for both the state and the industry.
As one industry leader put it, “We’re not against taxation. But we are against policies that punish growth and discourage digital entrepreneurship.”
Read More: Pakistan Budget 2025–26: Digital Reforms, Tech Growth & AI Transformation Explained
The Future of Pakistan’s Digital Economy Depends on Smart Policy
The digital sector holds massive potential for job creation, exports, and financial inclusion. But poor policy can slow that momentum fast.
The government now has a choice—push through harsh rules without feedback or work with the industry to create a tax system that supports growth, encourages compliance, and keeps Pakistan competitive in the global digital economy.
