New Taxes Raise E-commerce Costs in 2025

Islamabad, July 03, 2025, 01:20 PM PKT — The cost of doing business for Pakistan’s e-commerce sector has skyrocketed following the Finance Act 2025’s new taxes on courier services, with logistics costs—a critical expense for online sellers—spiking due to a 2% withholding tax and 2% sales tax on Cash on Delivery (COD) transactions, per industry reports. The Federal Board of Revenue (FBR) has mandated courier companies as tax collection agents, leveraging their role in invoicing and intermediary services between sellers and buyers, with deductions now enforced.

Pakistan E-commerce Association (PEA) Chairman Omer Mubeen warns of eroding profit margins and increased consumer burdens, noting online sellers—who cut margins for discounts and free delivery—face disadvantages versus tax-free physical stores. Large e-commerce platforms may absorb costs, but small and medium-sized enterprises (SMEs) will likely pass burdens to consumers to survive, compounded by rising taxes, fuel, electricity, gas, and internet costs. Mubeen urges a transition period for tax registration, a waiver of the 2% withholding tax for registered merchants, and a 0.25% income tax for compliant sellers to boost tax documentation and digitization.

Courier companies now require business registration for service access, barring unregistered sellers from processing orders, though one-time sellers and home-based women sellers are exempt. With over 100,000 micro and small online sellers driving a Rs2.2 trillion ($7.7 billion) market, e-commerce lags at less than 2% of GDP, trailing regional peers. Web context highlights Pakistan’s digital trade gap (e.g., 5% GDP in India, web ID: 0), while posts found on X show concern—some decry tax burdens, others question support for SMEs. Critically, the narrative of “tax compliance” may mask market inequity—web data points to SME struggles, and X sentiment suggests distrust in government aid, hinting at potential stagnation.