How Pakistan’s 2025 Budget Brings E-Commerce Platforms into the Tax Spotlight
In a pivotal development tied to the 2025 Budget, the National Assembly’s Standing Committee on Finance has advanced a key proposal in the Finance Bill 2025–26 to tax online businesses earning over PKR 5 million annually. The measure aims to expand tax coverage for Pakistan’s rapidly growing e-commerce and digital services sector, aligning with a national revenue target of PKR 14.13 trillion.
The clause, introduced during clause-by-clause scrutiny, follows broader ambitions under the new Digital Presence Proceeds Tax Act, which targets foreign digital platforms as well.
2025 Budget Raises Concerns for Women and Micro E-Commerce Sellers
The proposal has sparked concern among legislators and stakeholders over its impact on home-based and small-scale digital sellers, many of whom are women and youth. Committee member Sharmila Faruqi voiced apprehensions, noting that “many women are running online businesses from their homes,” and that taxing them prematurely could hinder financial inclusion.
Business leader Mirza Ikhtiar Baig also advocated for leniency, urging regulators to let the grassroots e-commerce economy grow organically before introducing heavier compliance burdens.
In response, FBR Chairman Rashid Langrial clarified that income thresholds will protect low-income sellers. Those earning below PKR 5 million or PKR 1.2 million in some categories will remain exempt, even if registered. “If someone earns less than the set threshold, even if registered, they won’t have to pay anything,” he assured.
Industry Pushes Back Against E-Commerce Tax in 2025 Budget
Despite reassurances, the online business community remains uneasy. At a press event in Karachi, representatives from the Chainstore Association and the Pakistan E-Commerce Association warned that the proposed tax structure which includes multiple withholding rates, complex registration rules, and harsh penalties could disrupt over 100,000 small vendors.
For many, especially informal sellers and micro-entrepreneurs using platforms like Instagram, WhatsApp, and cash-on-delivery services, the compliance cost could outweigh the benefits. Industry leaders urged the government to adopt a phased implementation strategy and consult with platforms, logistics providers, and payment gateways to build a streamlined, consensus-driven framework.
A Balancing Act for Pakistan’s Digital Future
While the Senate Finance Committee rejected blanket taxation of individuals earning PKR 1.2 million and recommended zero-rated tax for small sellers, both houses of Parliament appear united in bringing Pakistan’s digital economy into the formal tax net without crushing its most vulnerable players.
The road ahead requires balancing two objectives: meeting ambitious revenue targets while ensuring that Pakistan’s booming e-commerce ecosystem led by women, students, and small entrepreneurs isn’t strangled by red tape.
Startup.pk Takeaway: As Pakistan formalizes its digital economy, inclusivity and gradual rollout will be key. Startups and online sellers should stay informed, advocate for smart policy, and prepare for an evolving regulatory landscape.
FAQ
1. Who will be taxed under the proposed e-commerce tax policy in the Finance Bill 2025–26?
Online businesses and digital service providers earning over PKR 5 million annually will be subject to taxation. However, individuals earning below this threshold (or PKR 1.2 million for small sellers) will remain exempt, even if registered.
2. Will small, home-based online sellers be affected by this new tax?
According to FBR officials, sellers earning below the income threshold will not be taxed. However, the requirement for registration and potential compliance obligations may still apply, which has raised concerns among micro-entrepreneurs, especially women.
3. How is the government planning to implement the new tax regime for digital businesses?
The government plans to implement a Sales Tax Withholding regime ranging from 0.25% to 2%, depending on transaction value, and apply income tax on digital earnings. Industry representatives are urging a phased rollout and more stakeholder consultations.