Editorial
The imposition of fresh taxes under the Finance Act 2025 has triggered alarm in Pakistan’s fast-growing e-commerce sector. A 2% withholding tax and 2% sales tax on cash-on-delivery (COD) shipments have significantly increased operational costs for online sellers, especially small and medium-sized enterprises (SMEs). These taxes, now collected by courier companies acting as FBR’s agents, are being directly deducted from sellers’ earnings—shrinking already thin profit margins.
While larger platforms may absorb these costs, smaller sellers—students, women entrepreneurs, and freelancers—are at a disadvantage. Offering discounts and free delivery was once their competitive edge. Now, many may be forced to either increase prices or shut down. With utility prices already high and inflation biting deeper, this tax hike adds another burden on emerging digital entrepreneurs.
The Pakistan E-commerce Association (PEA) has warned that such measures will discourage formalisation and stifle growth. Its chairman, Omer Mubeen, called for a transition period and suggested waiving withholding tax for registered businesses while encouraging compliance through nominal taxes. He urged policymakers to support digitalisation—not punish it.
Courier companies have started informing sellers that without registration with tax authorities, delivery services will not be processed. This may disproportionately impact one-time sellers and home-based businesses, especially women. Though the government has exempted casual sellers from mandatory registration, implementation hurdles remain.
Entrepreneurs like Usman Akhtar argue that while other countries foster online markets with incentives and tax relief, Pakistan’s revenue-first approach risks derailing a vital sector. E-commerce now supports over one million livelihoods, with 100,000 sellers nationwide and a COD-driven market exceeding Rs2.2 trillion. Yet it still contributes under 2% to GDP.
If the government wishes to see real digital transformation, it must rethink taxing a sector that needs support, not obstacles.
