KARACHI / LAHORE – June 2025:
Leaders of Pakistan’s e-commerce industry have expressed deep concern over new taxation measures proposed in the Finance Bill 2025-26, warning that the changes could severely impact the growth of digital businesses and push thousands of compliant sellers back into the informal economy.
In a press conference held at the Karachi Press Club, Pakistan E-Commerce Association (PEA) Karachi Chapter President Shoaib Bhatti criticized the government’s plan to impose an additional 2% withholding sales tax on online businesses, in addition to the existing 18% general sales tax. He said this would place an excessive compliance burden on digital sellers who are already operating under formal tax systems.
“This is not just unfair—it’s damaging. Online businesses are being taxed more while informal retailers in major markets pay nothing,” Bhatti stated.
He added that the new tax burden threatens to undermine recent progress made in formalizing the digital economy. Pakistan’s e-commerce sector has grown by more than 35% annually over the past five years, with over 100,000 active online sellers currently supporting more than 1 million jobs across the country.
E-Commerce Sector Contribution Undervalued
The total size of Pakistan’s e-commerce market is estimated at Rs2.2 trillion, or approximately $7.7 billion, representing less than 2% of the national GDP and only 4% of total retail activity. Industry representatives say that while the sector is still emerging, it is already contributing significant revenue through transparent, digital payment systems.
They warn that rather than encouraging growth and documentation, the government’s abrupt tax changes could force small sellers to shut down or return to cash-based, unregistered models, weakening the digital economy.
Industry Leaders Raise Alarm in Lahore
In Lahore, a PEA delegation held a meeting with Lahore Chamber of Commerce and Industry (LCCI) President Mian Abuzar Shad to voice similar concerns. The group included former LCCI President Muhammad Ali Mian, Shahbaz Siddique, Imran Haider, and other members of the association’s executive committee.
The delegation emphasized that the Finance Bill introduces complex tax obligations without consulting stakeholders or providing a phased rollout plan. They said this has caused confusion and fear among sellers and digital marketplaces.
“These vague regulations and sudden taxes are disrupting the sector,” said one delegate. “Small businesses can’t afford this uncertainty.”
Regulated Platforms at a Disadvantage
Saad Shah, CEO of e-commerce platform Ucaaz, stated that platforms operating through banks and formal invoicing systems are being punished, while sellers in informal physical markets continue to operate tax-free.
“This move risks punishing compliance while rewarding informality. It sends the wrong message to entrepreneurs trying to do the right thing,” Shah noted.
He warned that disruption of the digital ecosystem would affect not just businesses, but also consumers, logistics providers, freelancers, and payment gateways that rely on steady online commerce growth.
PEA Urges Policy Review
The Pakistan E-Commerce Association has formally urged the government to:
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Withdraw the proposed 2% withholding sales tax
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Simplify tax procedures for small online sellers
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Avoid surprise policy changes without consultation
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Introduce reforms in a phased and structured manner
Members of the association indicated that they are willing to collaborate with the government to develop practical tax policies that encourage documentation without stifling growth.
