LAHORE: Pakistan’s e-commerce sector is facing a sharp rise in operational costs due to new taxes introduced under the Finance Act 2025. Industry experts say the 2% withholding tax and 2% sales tax on Cash on Delivery (COD) shipments have hit logistics expenses hard, forcing many online sellers to reconsider pricing and sustainability.
The Federal Board of Revenue (FBR) has now made courier companies tax collection agents, requiring them to deduct and deposit taxes from sellers. These deductions are being applied directly from seller invoices, placing a burden on especially small and medium-sized enterprises (SMEs) who rely on COD models for business.
Omer Mubeen, Chairman of the Pakistan E-commerce Association (PEA), said the new tax measures would shrink profit margins, raise customer prices, and risk shutting down small online businesses.
He proposed a 0.25% nominal income tax for registered sellers and a grace period to help them comply with registration requirements.
Courier companies have already started asking sellers to register with tax authorities. However, home-based and one-time sellers, particularly women, are exempted under the new policy. Still, young entrepreneurs and students say the regulations are complex and costly.
Usman Akhtar, a Lahore-based seller, called the policy “discouraging” and urged the government to reconsider taxes for at least five years to support digital growth.
Pakistan’s e-commerce sector has grown over 35% annually in recent years, supporting more than 1 million people and 100,000 small sellers. With a Rs2.2 trillion market dominated by 90% COD sales, experts warn that without thoughtful reforms, Pakistan could fall further behind regional peers in digital commerce.
