The Federal Board of Revenue (FBR) has enforced a new sales tax law targeting online businesses in a significant move to broaden Pakistan’s tax net.
Under newly amended rules, digital marketplaces, couriers, and payment agents are now required to deduct sales tax on every online order, including cash on delivery, and submit it to the FBR.
FBR amends Sales Tax Rules 2006
The FBR has issued a formal notification amending the Sales Tax Rules 2006, introducing a new chapter specifically aimed at digital transactions and e-commerce platforms. This amendment marks a crucial step towards regulating online businesses and bringing them into the formal tax system.
Under the updated law:
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Online marketplaces, courier services, and payment agents must now deduct sales tax at the time of transaction.
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The rule also applies to cash-on-delivery (COD) orders, ensuring that even offline payments in the digital commerce chain are taxed.
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The amount collected must be submitted to the FBR by the 10th of each month.
Monthly sales tax reporting now mandatory
To monitor compliance, the FBR has introduced three new reporting forms:
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STR-34 – To be submitted by online marketplaces, detailing all orders and suppliers.
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STR-35 – A general monthly return showing deducted tax, required from all involved parties.
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STR-36 – Required from courier services, especially those also operating as marketplaces.
Each form must be submitted on or before the 10th of every month, ensuring timely reporting and transparency in the e-commerce ecosystem.
Courier and payment agents must issue tax certificates
In addition to tax deductions, couriers and payment agents are now legally required to provide vendors with sales tax deduction certificates. These certificates must clearly show:
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Vendor’s name and registration number
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Description of the goods
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Exact amount of sales tax deducted
This step aims to enhance vendor documentation and create a verifiable paper trail for every taxable digital sale.
FBR amends export facilitation scheme
The FBR has also introduced key amendments to the Export Facilitation Scheme, removing certain tax exemptions and adjusting procedural requirements for exporters. The changes aim to streamline the process while expanding the tax net in the textile sector.
In a major policy shift, the FBR has removed the requirement for bank guarantees under the Export Facilitation Scheme and has now allowed insurance guarantees as an alternative.
Cotton products excluded from tax-free scheme
In another significant development, cotton and related products have been excluded from the scope of the scheme. According to the Statutory Regulatory Order (SRO) issued by the FBR:
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Raw cotton
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Cotton thread
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Cotton yarn
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Grey cloth
will no longer be eligible for tax exemptions under the Export Facilitation Scheme. This means these products will now be subject to applicable duties and taxes, affecting importers, manufacturers, and traders dealing in cotton-based goods.
