The cost of doing business for Pakistan’s e-commerce sector has significantly increased following the imposition of new taxes on courier services under the Finance Act 2025, it was learnt on Wednesday.
According to industry stakeholders, logistic service is one of the key expenses the sector has seen increase in, due to 2% withholding tax and 2% sales tax on delivery of different items based on Cash on Delivery (COD).
Courier companies have begun deducting these taxes from online sellers, in compliance with new regulations approved in the federal budget as the Federal Board of Revenue (FBR) has designated courier companies as collection agents, given that they hold sellers’ invoices and act as intermediaries.
Is the budget changing how government views e-commerce?
As per the Finance Bill, these companies are now responsible for collecting and depositing the relevant taxes on behalf of e-commerce sellers.
Pakistan E-commerce Association (PEA) president Omer Mubeen warned that the new tax measures would shrink profit margins and put an additional burden on customers.
Online sellers slash their margins to offer discounts and free delivery to attract customers, now they have limited options to continue their businesses as compared to physical retail shops paying nothing in taxes.
While large e-commerce marketplaces may be able to absorb some of the increased costs internally, small and medium-sized (SME) sellers are expected to pass on the financial impact to consumers in order to stay afloat.
“The rising cost of taxes, coupled with increasing fuel prices and utility charges, particularly electricity, gas, and internet are further squeezing already narrow profit margins for online businesses in Pakistan,” he said.
Mubeen urged the government to provide a transition period for sellers to register with tax authorities and proposed that the 2% withholding tax should be waived for registered merchants. He also recommended introducing a nominal 0.25% income tax for compliant sellers to ease their financial burden and encourage documentation and digitisation.
Courier companies have also started advising e-commerce businesses and individual sellers to complete tax registration in order to continue availing delivery services. Without proper registration, courier companies and online marketplaces will not be authorised to process or ship such orders.
However, one-time sellers and women selling goods from their homes will be exempted from mandatory registration under the new e-commerce tax rules.
Usman Akhtar, a Lahore-based e-commerce entrepreneur, expressed concerns over the new taxes, stating that thousands of budding online sellers, many of whom are students or young professionals, have invested time and capital to build sustainable businesses. He described the new taxes as “discouraging” for emerging entrepreneurs.
“These young sellers are now forced to bear additional tax costs and navigate a complex registration process that may not be feasible for many,” he said.
Akhtar said while other countries incentivise e-commerce and digital sectors through tax holidays and support policies to foster entrepreneurship and employment, Pakistan’s short-term revenue-driven approach threatens long-term growth potential.
The government should analyse the market trends of e-commerce growth in Pakistan, independently and review its decision to end taxes on online business across the country at least for the next five years.
Taxing the digital frontier: Pakistan’s bold move to tap e-commerce and online revenues
Online sellers slash their margins to offer discounts and free delivery to attract customers, now they have limited options to continue their businesses as compared to physical retail shops paying nothing in taxes.
According to estimates, Pakistan’s e-commerce sector has grown over 35% annually in the past five years. Today, over 100,000 micro and small online sellers are active, supporting incomes for more than a million people nationwide.
The market share of e-commerce carried out on COD model stands over 90% in Pakistan. The country’s total market size is estimated at Rs2.2 trillion ($7.7 billion), which is under 2% of the national gross domestic product (GDP) and trailing behind regional peers.
The cost of doing business for Pakistan’s e-commerce sector has significantly increased following the imposition of new taxes on courier services under the Finance Act 2025, it was learnt on Wednesday.
According to industry stakeholders, logistic service is one of the key expenses the sector has seen increase in, due to 2% withholding tax and 2% sales tax on delivery of different items based on Cash on Delivery (COD).
Courier companies have begun deducting these taxes from online sellers, in compliance with new regulations approved in the federal budget as the Federal Board of Revenue (FBR) has designated courier companies as collection agents, given that they hold sellers’ invoices and act as intermediaries.
Is the budget changing how government views e-commerce?
As per the Finance Bill, these companies are now responsible for collecting and depositing the relevant taxes on behalf of e-commerce sellers.
Pakistan E-commerce Association (PEA) president Omer Mubeen warned that the new tax measures would shrink profit margins and put an additional burden on customers.
Online sellers slash their margins to offer discounts and free delivery to attract customers, now they have limited options to continue their businesses as compared to physical retail shops paying nothing in taxes.
While large e-commerce marketplaces may be able to absorb some of the increased costs internally, small and medium-sized (SME) sellers are expected to pass on the financial impact to consumers in order to stay afloat.
“The rising cost of taxes, coupled with increasing fuel prices and utility charges, particularly electricity, gas, and internet are further squeezing already narrow profit margins for online businesses in Pakistan,” he said.
Mubeen urged the government to provide a transition period for sellers to register with tax authorities and proposed that the 2% withholding tax should be waived for registered merchants. He also recommended introducing a nominal 0.25% income tax for compliant sellers to ease their financial burden and encourage documentation and digitisation.
Courier companies have also started advising e-commerce businesses and individual sellers to complete tax registration in order to continue availing delivery services. Without proper registration, courier companies and online marketplaces will not be authorised to process or ship such orders.
However, one-time sellers and women selling goods from their homes will be exempted from mandatory registration under the new e-commerce tax rules.
Usman Akhtar, a Lahore-based e-commerce entrepreneur, expressed concerns over the new taxes, stating that thousands of budding online sellers, many of whom are students or young professionals, have invested time and capital to build sustainable businesses. He described the new taxes as “discouraging” for emerging entrepreneurs.
“These young sellers are now forced to bear additional tax costs and navigate a complex registration process that may not be feasible for many,” he said.
Akhtar said while other countries incentivise e-commerce and digital sectors through tax holidays and support policies to foster entrepreneurship and employment, Pakistan’s short-term revenue-driven approach threatens long-term growth potential.
The government should analyse the market trends of e-commerce growth in Pakistan, independently and review its decision to end taxes on online business across the country at least for the next five years.
Taxing the digital frontier: Pakistan’s bold move to tap e-commerce and online revenues
Online sellers slash their margins to offer discounts and free delivery to attract customers, now they have limited options to continue their businesses as compared to physical retail shops paying nothing in taxes.
According to estimates, Pakistan’s e-commerce sector has grown over 35% annually in the past five years. Today, over 100,000 micro and small online sellers are active, supporting incomes for more than a million people nationwide.
The market share of e-commerce carried out on COD model stands over 90% in Pakistan. The country’s total market size is estimated at Rs2.2 trillion ($7.7 billion), which is under 2% of the national gross domestic product (GDP) and trailing behind regional peers.
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