Govt exploring options to bring online shopping into tax net

ISLAMABAD: The government is exploring options to bring online shopping (e-commerce) into the tax net in the upcoming budget 2025-26.

Different methods are under consideration to boost revenues from this untapped online shopping, which has now become part and parcel of all upper and middle-income households in major urban centres of the country.

The Federal Board of Revenue (FBR) is contemplating options to impose general sales tax (GST) with provision to allow deduction of 3 per cent tax from the customer by the deliverer on cash delivery on behalf of the FBR, which will be deposited into the national kitty. The remaining 15 per cent GST may be collected by the manufacturer and incorporated into the cost of the product.

Pakistan and the International Monetary Fund (IMF) will kick-start virtual talks from Wednesday (today) to finalise the upcoming budget 2025-26, including curtailing the expenditure and jacking up tax revenues in a bid to restrict the budget deficit aligned with the IMF target of 5.1 per cent of GDP for the next fiscal year.

Different governments of the country have failed to bring millions of retailers into the effective tax net despite making efforts in the past, and the incumbent regime met with the same failure as its Tajir Dost Scheme could not lure retailers to come into the tax net. Now online shopping has been identified as another area that can be brought into the tax net. The FBR is also considering proposals to expand the tax net through the purchase of products via debit cards/credit cards. There is a federal excise duty (FED) charged on international payments on credit cards or debit cards, but on local sales, there is no FED imposed.

The FBR has conducted a study and found that there is a huge potential as online shopping has become a growing trend in the country’s urban areas.

“We are considering options to bring online shopping or e-commerce into the tax net from the next budget. We have estimated that online shopping has become a growing phenomenon in Pakistan. So, different tax proposals will be discussed with the IMF team, which will start parleys from Wednesday (today),” an official said.

The FBR will propose changes in the tax law and will make it mandatory for online or even those operating as marketplaces without owning the inventory, to collect and deposit sales tax on behalf of the government. However, tax experts have sternly opposed this proposed taxation measure, arguing that if online shopping is taxed, it will result in a loss to this growing but nascent trend in the country. However, tax authorities believe that this is the appropriate stage to bring online shopping into the tax net because if it grows without taxation mode, it will become harder to convince people to come into the tax net.