The federal government of Pakistan has officially approved the Finance Bill 2025–26, introducing major regulatory and taxation reforms aimed at structuring and documenting the country’s fast-growing digital commerce sector. With formal definitions, mandatory compliance rules, and enforcement mechanisms now in place, the bill marks a turning point for how eCommerce businesses, intermediaries, and sellers operate within Pakistan.
A key highlight of the bill is the formal recognition of the digital commerce ecosystem in the Sales Tax Act, 1990. For the first time, terms such as eCommerce, online marketplaces, payment intermediaries, and couriers have been officially defined. eCommerce is now legally identified as the sale or purchase of goods and services over digital networks including websites, apps, and online platforms. Online marketplaces are platforms that connect multiple buyers and sellers, while payment intermediaries include financial entities like banks, fintech apps, and gateways that process online transactions. Couriers are defined as companies that deliver goods and handle payments on behalf of sellers, encompassing logistics firms, ride-hailing services, and food delivery apps.
The most notable change is the shift of tax deduction responsibility from the sellers to intermediaries. Payment intermediaries will now be responsible for collecting two percent sales tax on all digitally paid transactions, while couriers must withhold the same tax rate for all cash-on-delivery orders. The two percent tax is applied to the gross value of digitally ordered goods originating within Pakistan and is deemed to be the final tax liability, with no provision for input tax adjustments.
According to Section 3(7A) of the amended law, the sales tax withheld by the intermediary or courier will constitute the complete tax obligation of the seller, effectively simplifying tax calculation while eliminating the option to claim input credits. This will particularly affect businesses with high-cost structures, as they can no longer adjust their taxes based on operational expenses.
The bill further mandates that all persons or businesses selling digitally ordered goods from within Pakistan must be registered for both sales tax and income tax. This includes sellers using personal websites, apps, online marketplaces such as Daraz, or social media platforms like Facebook Shops. Marketplaces and couriers are now prohibited from facilitating unregistered sellers, and failure to comply will result in steep penalties.
The law also introduces monthly reporting requirements for digital platforms and service providers. Payment gateways, couriers, and marketplaces must submit monthly statements detailing each digitally ordered taxable supply, including supplier-wise tax and payment breakdowns. Non-compliance with this reporting mandate carries penalties starting from PKR 500,000 for the first offence and escalating to PKR 1 million for subsequent defaults.
To ensure enforcement, the bill grants authorities the power to freeze the bank accounts of non-compliant sellers, restrict the transfer of their property, seal premises, appoint receivers, and issue public warnings. These actions will follow due process involving notifications and hearings.
In addition, the Eleventh Schedule of the updated Sales Tax Act introduces a uniform two percent flat tax on digitally ordered goods. This tax will be applied to the gross value of supply and will be deducted by the courier or payment intermediary. Sellers will not be able to claim any input tax adjustments, marking a simplified yet rigid approach to compliance.
For businesses involved in digital selling, the implications are extensive. They must now ensure complete tax registration for all vendors, including micro-entrepreneurs and informal sellers. Integration with tax-compliant couriers and payment intermediaries is essential for real-time tracking and deduction of taxes. Pricing strategies may need to be revised to accommodate the non-adjustable two percent tax, and sellers must be educated on compliance requirements to avoid operational bans and financial penalties.
While the Finance Bill 2025–26 aims to improve transparency and enhance revenue collection from Pakistan’s booming eCommerce sector, the government will need to ensure the reforms are implemented with clarity and support. The success of this framework will depend on how effectively it balances compliance with ease of doing business, especially for smaller vendors and women-led home-based sellers.
