In a significant policy development aimed at fostering sustainable growth in Pakistan’s booming digital economy, Federal Minister for Commerce Jam Kamal Khan and Federal Minister for IT and Telecommunication Shaza Fatima Khawaja have jointly proposed reforms to the country’s taxation and regulatory framework for the eCommerce sector. These recommendations come as part of a broader initiative to support small and medium enterprises (SMEs) and streamline the digital trade ecosystem.
The proposal was discussed during a high-level meeting focused on addressing pressing challenges in the eCommerce landscape. A statement issued by the Ministry of Commerce on Thursday highlighted that the government is taking a consultative and forward-thinking approach toward shaping its next policy.
As part of this effort, Minister Kamal Khan announced the creation of a joint working group, with active input from the Ministry of IT and Telecommunication. This group is tasked with gathering comprehensive insights and recommendations on key issues including taxation structures, vendor compliance protocols, and digital payment systems. The findings from this working group will be formally submitted to Prime Minister Shehbaz Sharif for final consideration and policy formulation.
The reform discussion gained further importance following the federal budget presentation for the fiscal year 2025-26, delivered on Tuesday. As part of the budget, the government proposed a 5% withholding tax on payments made to both domestic and international digital vendors. This measure would apply to platforms such as Amazon, Google, Facebook, Netflix, Daraz, Temu, and PakWheels for goods or services delivered to consumers in Pakistan. The objective is to broaden the tax net and ensure equitable tax contributions from global and local digital players operating in the country.
In addition to the withholding levy, the government has also proposed an 18% standard value-added tax (VAT) on online marketplaces that facilitate the sale of goods and services. Platforms like OLX, Zameen, Daraz, and PakWheels that serve as intermediaries between sellers and buyers are expected to fall under this tax framework. This move is designed to bring consistency in tax treatment and address revenue leakages by standardizing the taxation model across digital platforms.
During the same meeting, Minister Kamal confirmed that Pakistan’s updated eCommerce Policy 2.0 is nearing completion and is currently undergoing final internal reviews. Once finalized, the policy will be submitted for cabinet approval, marking another milestone in the government’s efforts to modernize digital trade governance.
Pakistan’s eCommerce sector continues to witness rapid expansion. The market reached a valuation of $7.7 billion in 2024, with forecasts indicating a 17% compound annual growth rate through 2027. This growth underscores the urgent need for a robust regulatory framework that supports innovation while ensuring fair compliance and tax collection.
The ministers reaffirmed their commitment to developing a digitally inclusive and globally competitive eCommerce environment. They stressed that key issues faced by digital entrepreneurs, SMEs, and consumers will be addressed at the highest level to ensure a seamless and sustainable evolution of the digital economy in Pakistan.
