FBR Mandates E-Commerce Platforms to Withhold Sales Tax at Source
Pakistan’s Federal Board of Revenue (FBR) has introduced a significant reform aimed at strengthening tax compliance in the rapidly expanding e-commerce sector. Under the new framework, sales tax on goods ordered through digital platforms will now be withheld at source, ensuring more efficient and transparent tax collection.
The move places the responsibility of tax deduction on intermediaries operating within the digital ecosystem. These include payment intermediaries, courier companies, and online marketplaces that facilitate transactions between buyers and sellers. By shifting the point of collection closer to the transaction stage, the FBR aims to reduce tax leakage and enhance documentation of online trade.
E-commerce in Pakistan has witnessed consistent growth in recent years, driven by increasing internet penetration and changing consumer behavior. However, tax compliance within the sector has remained a challenge. Many online sellers operate informally, making it difficult for authorities to track and collect due sales tax. The newly implemented system is designed to address this gap by integrating tax deduction directly into the transaction process.
Under the revised mechanism, withholding agents will deduct applicable sales tax at the time of payment processing or delivery. This ensures that tax liabilities are met before funds reach the seller. Payment intermediaries handling digital transactions, courier services managing cash-on-delivery orders, and online marketplaces hosting third-party vendors will play a central role in executing this system.
The FBR believes that involving these intermediaries will improve enforcement without placing excessive administrative burdens on individual sellers. Instead of pursuing thousands of small vendors, the tax authority can now coordinate with a limited number of organized entities that already maintain digital transaction records.
For businesses operating online, this reform underscores the importance of proper registration and compliance with tax laws. Sellers must ensure that their documentation and tax status are aligned with FBR requirements to avoid penalties or disruptions in payment settlements.
Consumers are unlikely to experience major procedural changes, as the tax deduction will occur seamlessly within the transaction cycle. However, the broader impact of the reform is expected to bring greater transparency to Pakistan’s digital economy.
As e-commerce continues to expand, regulatory oversight is becoming increasingly essential. The FBR’s withholding-at-source model reflects a broader strategy to modernize tax administration and ensure that digital trade contributes fairly to national revenue. By strengthening compliance mechanisms, the government aims to support sustainable economic growth while formalizing Pakistan’s growing online marketplace.
