Does the online sales tax apply to services I sell online, like courses or digital downloads?

Services are inside the income tax rules for online sales and outside the Sales Tax Act’s e-commerce rules. The Income Tax Ordinance speaks of “digitally ordered goods or services” throughout. The Sales Tax Act, 1990 speaks only of goods. Tax on services themselves sits under separate laws.

What does the Income Tax Ordinance say?

The charge. Section 6A(1) imposes a tax on every person who receives payment for supply of “digitally ordered goods or services” delivered from within Pakistan using locally operated online platforms, including online marketplaces or websites. Section 6A(2) applies the rate to gross receipts.

The collection. Section 153(2A)(i) makes every payment intermediary collect the tax when processing a digital payment on behalf of a seller of “digitally ordered goods or services” through locally operated e-commerce platforms, including websites. Section 153(2A)(ii) does the same for couriers collecting cash on delivery for “digitally ordered goods and services”.

The definition. Section 2 defines e-commerce as the “sale or purchase of goods and services” over computer networks, through websites, mobile applications or online marketplaces with digital ordering features.

The rates for tax year 2027. Division IVA of Part I of the First Schedule sets the rate for payment for “digitally ordered goods or digitally ordered services” at 1% of the gross amount through digital means or banking channels by a payment intermediary, and 2% for cash on delivery by a courier. Paragraph (3A) of Division III of Part III repeats the same rates for the deduction under section 153(2A). One small difference in wording: paragraph (3A) says “digitally delivered services”, while section 6A, section 153(2A) and Division IVA say “digitally ordered”. The rates are the same in both places.

What does the Sales Tax Act say?

The e-commerce rules in the Sales Tax Act are written around goods:

• section 2 defines e-commerce as the “sale or purchase of goods” over computer networks;
• section 2 defines a payment intermediary by reference to payments “with respect to goods”;
• section 3(3)(c) puts the collection duty on payment intermediaries and couriers for “digitally ordered taxable goods”; and
• serial number 8 of the Eleventh Schedule sets the 2% withholding for persons supplying “digitally ordered goods”.

On that text, a course, coaching session or other service is not within these rules. Sales tax on services in Islamabad is dealt with under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, and in each province under a provincial law. This page does not cover whether any of those taxes apply to a particular online service. The provincial laws are outside the texts held here.

Worked example (illustrative figures)

Usman lives in Rawalpindi and sells a recorded Excel course on his own website at Rs. 4,000 per student. Buyers pay by card through a payment gateway. In November 2026, in tax year 2027, 60 students bought the course.

Step 1, gross receipts: 60 x Rs. 4,000 = Rs. 240,000.

Step 2, income tax collected by the gateway at 1%: Rs. 240,000 x 1% = Rs. 2,400.

Step 3, amount settled to Usman before the gateway’s own fees: Rs. 240,000 minus Rs. 2,400 = Rs. 237,600.

No sales tax withholding under serial number 8 of the Eleventh Schedule applies on the text, because the course is a service. The sales figures are made up. The 1% rate is the tax year 2027 rate.

What if …?

What if I sell a printed workbook alongside the course? The workbook is a good. If it is sent by courier on cash on delivery, section 153(2A)(ii) and the 2% rate apply to that part, and the Sales Tax Act e-commerce rules can apply to it as goods.

What if my students are abroad? The proviso to section 6A(1) keeps export proceeds that are subject to withholding under the export provisions of the Ordinance outside section 6A. Export orders are covered on a separate page.

What if I sell templates or other files for download? The Ordinance covers goods or services, so the income tax rules apply either way. Whether a download is goods for the Sales Tax Act is not settled by the text held here.

Common mistakes

• Assuming the online sales tax is only for physical products. The Ordinance says goods or services at every step.
• Assuming the 2% sales tax withholding covers courses. The Sales Tax Act rules speak of goods only.
• Treating services tax as covered here. Services tax in the provinces and in Islamabad sits under separate laws.

What to check in the official text

Read section 6A, section 153(2A) and the definition of e-commerce in section 2 of the Income Tax Ordinance as amended to 30 June 2026, with Division IVA of Part I and paragraph (3A) of Division III of Part III of the First Schedule. Then read the definitions of e-commerce and payment intermediary in section 2, and section 3(3)(c), of the Sales Tax Act, 1990. For tax on the service itself, check the Islamabad or provincial services tax law that applies to you.