FBR Expands Tax Net to E-Commerce: Sales Tax Now Mandatory on All Online Orders
In a move signaling a tighter grip on the digital economy, Pakistan’s Federal Board of Revenue (FBR) has mandated the collection of sales tax on all online orders — including cash-on-delivery (COD) transactions. This marks a significant policy shift aimed at formalizing the country’s rapidly growing e-commerce sector.
E-Commerce Platforms, Couriers, and Payment Gateways Now Accountable
Through newly issued amendments to the Sales Tax Rules, 2006, the FBR has introduced a chapter specifically targeting online transactions. Under these changes, online marketplaces, courier companies, and payment agents are now legally required to deduct sales tax at the time of purchase — even when the customer pays cash upon delivery.
The deducted tax must be deposited with the FBR by the 10th of every month. The regulation applies across the board, effectively closing a long-standing tax loophole used by many online vendors.
New Monthly Reporting Obligations for E-Commerce Players
To enforce compliance, the FBR has rolled out three mandatory monthly reporting forms:
- STR-34: For digital marketplaces, detailing transactions and vendors involved.
- STR-35: A universal monthly tax return for all intermediaries.
- STR-36: Specifically for courier firms, especially those operating as hybrid platforms.
Each form is due by the 10th of every month — a deadline that stakeholders in the logistics and fintech sectors will now need to closely monitor.
Tax Certificates Now Mandatory for Vendors
In addition to collecting and reporting tax, couriers and payment processors must now issue official sales tax deduction certificates to vendors. These documents must clearly show:
- Vendor name and tax registration number
- Itemized list of goods sold
- Total tax deducted
This measure is expected to increase transparency and ensure traceable documentation across digital supply chains — a step that could significantly aid future audits and enforcement.
Export Sector Also Sees Major Policy Shifts
The FBR isn’t stopping at e-commerce. It has also overhauled key elements of its Export Facilitation Scheme, introducing changes likely to impact Pakistan’s textile sector.
Insurance Guarantees Replace Bank Guarantees
In a move designed to reduce procedural burdens on exporters, the FBR will now accept insurance guarantees in place of bank guarantees — a long-demanded reform that could improve cash flow for exporters.
Cotton Products Removed from Tax-Exempt List
Notably, the FBR has withdrawn tax exemptions for various cotton-related goods under the same scheme. According to the latest Statutory Regulatory Order (SRO), the following items will no longer enjoy duty-free status:
- Raw cotton
- Cotton thread
- Cotton yarn
- Grey cloth
This adjustment is expected to have a ripple effect across the cotton value chain, from importers and manufacturers to small traders, potentially raising costs and reshaping sourcing strategies.
Bottom Line
With these back-to-back policy updates, the FBR is clearly signaling a broader intent: formalize undocumented sectors and plug revenue leakages. While businesses will face increased compliance costs in the short term, the long-term goal is a more transparent and tax-compliant economy — especially in the fast-expanding digital and textile sectors.
