In a significant move aimed at expanding Pakistan’s tax base, the Senate Standing Committee on Finance and Revenue has approved new tax measures targeting the e-commerce sector. The decision was taken during the committee’s third consecutive session reviewing the Finance Bill 2025–26, chaired by Senator Saleem Mandviwalla.

The session was attended by key figures including Finance Minister Muhammad Aurangzeb, Minister of State for Finance Bilal Azhar Kiyani, and Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial. The focus remained on enhancing revenue without adding undue burden on vulnerable populations.

Key Reforms in E-Commerce Taxation:

The committee approved a structured sales tax collection mechanism for e-commerce transactions:

• Courier services will now act as sales tax collection agents, utilizing their access to invoices and delivery data.

• All digital sellers, including foreign companies selling to Pakistani consumers through websites, apps, or marketplaces, will be required to register with the FBR.

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• Unregistered sellers could face enforcement actions, although the FBR has assured leniency for informal or low-volume sellers such as housewives and hobbyists.

Implications for the Digital Economy:

This taxation reform aims to bring Pakistan’s fast-growing but largely undocumented e-commerce sector into the formal economy. With annual revenues crossing Rs. 150 billion in 2024, the sector has immense potential, but much of it remains untaxed due to seller non-registration and platform informality.

Strengths of the Policy:

• Creates tax parity between online and brick-and-mortar retailers.

• Enhances transparency and boosts compliance.

• Leverages existing courier infrastructure for efficient tax collection.

Potential Challenges:

• May disproportionately affect small-scale sellers on platforms like WhatsApp, Instagram, and Facebook Marketplace.

• Pakistan lacks the digital infrastructure for widespread registration, particularly in rural areas.

• Risks of sellers turning to informal channels if not supported with incentives.

• Enforcement against global platforms could face jurisdictional and legal hurdles.

The Way Forward:

Although these recommendations are not yet law, they represent a clear signal of the government’s intent to regulate and tax digital commerce more effectively. If enacted with clarity and adequate infrastructure, the policy could expand tax revenues while fostering a more formal and fair digital economy.