E-commerce and online sellers

Tax on online stores, marketplaces, courier-collected payments and digital sales. Each answer below explains one point in plain words, works through an example, and links the exact section of the law it relies on.

• What happens if a customer pays more than Rs. 200,000 in cash on delivery?Section 21(s) disallows 50% of expenses claimed on a sale where over Rs. 200,000 on one invoice is received other than by banking channel or digital means.
• What happens if my courier or payment gateway does not deduct the tax?A courier or gateway that skips the section 153(2A) deduction faces a 100% penalty and is liable for the tax, which can also be recovered from the seller.
• Do foreign sites like Temu or AliExpress pay tax on sales to Pakistani buyers?The Digital Presence Proceeds Tax Act, 2025 charges 5% on foreign vendors with significant digital presence, collected when payment is remitted abroad.
• Do I need sales tax registration (STRN) to sell goods online, or is an NTN enough?Section 14(1A) of the Sales Tax Act requires online sellers of goods to register for sales tax, except a cottage industry and retailers paying via power bills.
• Do I need an NTN to sell online, and why does my courier refuse to book parcels without it?Section 181 requires online sellers to register for income tax and bars marketplaces and couriers from serving vendors not registered under the Ordinance.
• Does the online sales tax apply to services I sell online, like courses or digital downloads?Income tax on e-commerce receipts covers digitally ordered goods or services. The Sales Tax Act e-commerce rules cover goods only, not courses.
• Is the e-commerce tax deducted on orders I ship abroad from my online store?Section 6A excludes export proceeds taxed under sections 154 and 154A. Exported goods carry a 1.25% export deduction instead of the 1% or 2% e-commerce rate.
• Does the e-commerce tax apply to my own website or Instagram store, or only to marketplaces like Daraz?Section 6A names websites as well as online marketplaces, so own-store sellers are covered. Social media stores are not named, which leaves room for doubt.
• I sell from home or only sold a few items once. Is there an exemption from registering?What sections 181 and 14(1A) say for home-based and occasional online sellers, the two written sales tax exceptions, and what the law does not exempt.
• How much income tax is deducted from my online sales paid by cash on delivery or by card?For tax year 2027, couriers deduct 2% income tax from cash on delivery sales and payment intermediaries deduct 1% from card and digital payments to sellers.
• Is there 18% sales tax on everything I sell online?The Sales Tax Act sets 18% on taxable supplies by registered persons, while couriers and payment gateways withhold 2% of gross value on online sales.
• Is the 2% sales tax withheld on my online orders my full liability, or can I adjust it against input tax?Section 3(7A) makes the 2% withheld on online sales final only for cottage industry and non-Tier-1 retailers. Other sellers work out tax under section 7.
• Is the tax deducted on my online sales a final tax, and when can it be adjusted instead?Section 8 makes section 6A e-commerce tax final. It is adjustable above Rs. 200 million turnover, and smaller sellers may opt out from tax year 2027.
• Is there a turnover limit below which online sellers pay no tax?The e-commerce tax in sections 6A and 153(2A) has no minimum turnover. Here is what the Rs. 8 million and Rs. 200 million thresholds actually do.
• Is more tax deducted from my online sales if I am not on the Active Taxpayers List?Rule 1 of the Tenth Schedule doubles the e-commerce tax rate for sellers not on the active taxpayers' list: 1% becomes 2% and 2% becomes 4% in tax year 2027.
• What is the penalty for selling online without registering with FBR?Entry 15A of section 182 sets Rs. 500,000 then Rs. 1 million per default for unregistered online sellers. Sales tax serial 7 adds Rs. 50,000 or 5% of tax.
• How do I get proof of the tax my courier or payment gateway deducted?Section 164 requires the courier or gateway to give you a certificate and receipt copies when it deducts tax, and section 165C makes it report you to FBR.
• Do I still have to file an income tax return if tax is already deducted on my online sales?Yes. Section 114(1)(ae) requires a return from anyone whose income is subject to final taxation, including section 6A e-commerce tax deducted at source.
• I have a physical shop and also sell online. Which sales tax rules apply to my online orders?A shopkeeper who is not Tier-1 pays sales tax through the electricity bill, and the 2% withheld on online orders is final. Tier-1 retailers must register.
• Is tax deducted when customers pay me through JazzCash, Easypaisa or a direct bank transfer?Banks and wallets can be payment intermediaries and bank transfers are digital means, but the law does not clearly settle direct transfers to sellers.
• Is the online sales tax worked out on the full order value, including delivery charges and returned parcels?E-commerce income tax is charged on the gross amount paid to the seller, including sales tax. The law is silent on delivery charges and on returned parcels.
• What counts as a cottage industry for the online sales tax rules?A cottage industry under section 2(5AB) is a small manufacturing concern meeting four tests. Online sellers who qualify need no sales tax registration.
• What do online marketplaces and couriers report to FBR about my sales?Couriers and payment intermediaries file quarterly seller-wise statements, and online marketplaces file monthly vendor statements with turnover.
• Who deducts tax from my Daraz or other marketplace payout, and at what rate?The law makes payment intermediaries and couriers collect e-commerce tax at 1% or 2% income tax and 2% sales tax, and makes marketplaces report sellers.
• Why is 4% cut from my COD remittance when the income tax rate is 2%?A 4% cut on COD payouts is usually two taxes: 2% income tax under section 153(2A) and 2% sales tax the courier withholds under the Eleventh Schedule.