Pakistan’s E-Commerce Sector Faces Strain Under New Digital Tax Rules

Pakistan’s e-commerce sector is under pressure following the government’s implementation of new digital taxes introduced in the 2025 federal budget.

The revised policy imposes a 2% digital tax on all online sales, including those made through websites, apps, and marketplaces—regardless of whether transactions are completed via digital payment or cash on delivery (CoD). Additionally, non-tax-filer sellers are now subject to increased withholding tax of 2%, deducted by courier companies and payment gateways.

Small businesses and home-based sellers, especially those relying on CoD, are struggling to absorb the added cost. Industry stakeholders warn this could discourage digital entrepreneurship and hurt job creation.

Meanwhile, the government’s recent rollback of a 5% tax on foreign e-commerce platforms has drawn criticism, with local sellers calling it a move that favors global players over domestic businesses.

E-commerce associations are urging the government to review the tax structure, simplify compliance, and support smaller sellers during the transition.

Despite the challenges, Pakistan’s e-commerce market—valued at over Rs 2.2 trillion—continues to show growth potential. But experts say balanced, inclusive policies are key to ensuring its long-term success.