Soon after Pakistan’s federal budget for 2025-26 was made public, its newly introduced taxation policy for the e-commerce sector faces criticism. Experts have criticized the move, warning that it may negatively impact small and medium-sized enterprises (SMEs) and slow down their growth and proposed them to revise the changes.
In response, both the Ministry of Commerce and the Ministry of Information Technology have stepped forward with proposals to revise the e-commerce tax policy. Their aim is to help boost the country’s economic growth to a modest 4.2%, up from the 2.7% projected for the closing fiscal year.
The government’s announcement of an 18% sales tax on goods sold through e-commerce platforms in the FY26 budget has sparked debate. Federal Ministers Jam Kamal Khan and Shaza Fatima Khawaja stressed the need for revisions to support e-commerce businesses and SMEs.
“The rapid growth of online businesses and digital marketplaces has created challenges for traditional businesses,” the Federal Finance Minister Muhammad Aurangzeb stated while highlighting the importance of bringing these platforms under tax compliance.
According to the Finance Bill 2025-26, the government plans to introduce a tiered tax on digital payments made through e-commerce channels. The structure includes:
- 1% tax on online transactions up to Rs10,000.
- 2% tax on transactions between Rs10,001 and Rs20,000.
Cash-on-delivery purchases will also be taxed differently, with rates set at 0.25% for electronics and 1% for clothing items.
Officials claim the move is intended to streamline the growing e-commerce space, reduce loopholes, and create a fair business environment for both traditional and digital sellers.