Govt eyes tax on e-commerce in budget 2025–26 amid IMF talks

The government is preparing to bring Pakistan’s booming e-commerce sector under the tax net in the upcoming 2025–26 federal budget, aiming to generate more revenue as part of fiscal reforms agreed with the International Monetary Fund (IMF).

Officials from the Federal Board of Revenue (FBR) are evaluating several measures to tap into the rapidly growing trend of online shopping, particularly among middle and upper-income consumers in major urban centers like Karachi, Lahore, and Islamabad.

Among the proposals under consideration is the imposition of general sales tax (GST) on e-commerce transactions. One key option includes deducting 3% GST at the point of cash delivery, to be collected by delivery agents on behalf of the FBR. The remaining 15% GST would be factored into product costs by the manufacturers.

The move comes as virtual talks between Pakistan and the IMF begin today to finalize the fiscal roadmap for the next year. These discussions are crucial to meeting the IMF’s fiscal deficit target of 5.1% of GDP.

Despite repeated efforts, successive governments have failed to effectively integrate millions of retailers into the formal tax net. The incumbent government’s recent Tajir Dost Scheme aimed at engaging retailers also failed to attract substantial participation. Authorities now view online shopping as a promising avenue for expanding the tax base.

The FBR is also reviewing options to tax domestic purchases made via credit or debit cards, noting that federal excise duty (FED) is already imposed on international card payments, but not on local transactions.

According to an internal FBR study, Pakistan’s e-commerce market has significant untapped potential, especially in urban areas where digital buying behavior is now mainstream.

“We are considering options to bring online shopping or e-commerce into the tax net from the next budget,” said a senior official involved in the discussions. “The phenomenon has grown rapidly, and this is the right time to incorporate it into the tax framework before it becomes harder to regulate.”

Proposed legal reforms may also require online platforms and marketplaces—even those not holding inventory—to collect and deposit sales tax on the government’s behalf. However, tax experts have raised concerns, warning that premature taxation may hinder growth in a sector still finding its footing.

In contrast, tax officials argue that waiting too long to regulate the sector could create larger compliance issues in the future.

The final framework will be discussed during the ongoing Pakistan-IMF budget negotiations, and any changes are expected to be announced with the official budget next month.