The Federal Board of Revenue (FBR) has rolled out a new system to strengthen tax compliance in Pakistan’s rapidly growing e-commerce sector, requiring the collection of sales tax on digitally ordered goods to be withheld at source. The initiative targets payment intermediaries, courier companies, and online marketplaces, designating them as withholding agents responsible for deducting sales tax from payments made to suppliers and remitting it to the FBR.
To ensure smooth implementation, the FBR has issued a comprehensive user manual outlining the responsibilities and operational procedures for all stakeholders involved. The manual provides step-by-step guidance on utilizing the IRIS system to generate e-payments, Payment Slip IDs (PSID), Computerized Payment Receipts (CPR), submit monthly withholding statements, and claim admissible sales tax credits. According to the FBR, this approach will standardize processes, enhance accuracy, and improve compliance across the e-commerce tax ecosystem.
Under the new framework, payment intermediaries and courier companies are required to withhold sales tax only on the payments they process. Their monthly withholding statements will therefore reflect transactions handled directly through their systems. The system is designed to auto-populate statements from CPR data, minimizing errors and ensuring consistency in reporting.
For online marketplaces, the reporting structure is broader. Their monthly statements will aggregate all transaction data, including payments processed by both payment intermediaries and courier services. This comprehensive reporting ensures that marketplaces are accountable for the overall flow of digitally ordered goods transactions, allowing the FBR to monitor compliance effectively and maintain a transparent record of tax collection.
The FBR emphasizes that this initiative is part of a broader effort to modernize tax administration and improve transparency in the digital economy. By automating key reporting and compliance functions, the system aims to reduce administrative burdens, limit discrepancies, and promote timely remittance of sales tax. It also encourages informed decision-making by providing clear guidance on statutory obligations for all withholding agents.
Officials noted that the introduction of the withholding mechanism aligns with the government’s objective of creating a transparent, reliable, and coordinated e-commerce taxation ecosystem. By enabling intermediaries and marketplaces to accurately manage tax obligations, the FBR aims to bolster revenue collection while supporting the growth and formalization of Pakistan’s digital commerce landscape.
The new framework also provides stakeholders with tools to verify compliance, claim tax credits, and streamline reporting processes, fostering trust between the tax authorities and e-commerce participants. The FBR’s step reflects a commitment to leveraging technology for efficiency, consistency, and procedural compliance, ensuring that Pakistan’s digital economy can thrive under a robust and transparent regulatory structure.
This development marks a key milestone in Pakistan’s efforts to modernize taxation in line with global best practices, making e-commerce transactions more accountable while protecting the interests of both the government and businesses engaged in digital trade.
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