Is there a turnover limit below which online sellers pay no tax?

Figures such as Rs. 8 million and Rs. 200 million circulate as “tax-free limits” for online sellers. Neither works that way. The income tax on e-commerce receipts starts with the first rupee, and those two figures decide other things: whether a maker is a cottage industry for sales tax, and whether the income tax is final or adjustable.

What does the law say?

The charge has no floor. Section 6A(1) of the Income Tax Ordinance imposes tax “on every person who receives payment for supply of digitally ordered goods or services” delivered from within Pakistan through locally operated online platforms. Section 6A(2) applies the rate to the gross amounts of receipts. Neither sub-section sets a minimum.

The collection has no floor. Section 153(2A) requires every payment intermediary processing a digital payment, and every courier collecting cash on delivery, to “collect tax from the gross amount payable (including sales tax, if any) to the seller”. It sets no minimum payment or minimum turnover.

The rates. Division IVA of Part I of the First Schedule sets, for tax year 2027:

Payment channel	Rate
Digital means or banking channels, by payment intermediary	1% of gross amount paid or payable
Cash on delivery, by courier service	2% of gross amount paid or payable

Which thresholds do exist?

Figure	Where	What it decides
Rs. 200 million	Income Tax Ordinance, section 6A(3)	Above it in a tax year, the e-commerce tax is adjustable. Up to it, a person may opt out of the final tax regime when filing the return for tax year 2027 onwards.
Rs. 8 million	Sales Tax Act, section 2(5AB)(d)	Annual turnover limit that, with three other conditions, makes a manufacturing concern a cottage industry, which is outside the sales tax registration duty in section 14(1A).
Rs. 200 million	Sales Tax Act, section 2(43A)(gb)	A retailer with turnover above it in the preceding twelve months is a Tier-1 retailer.

None of these switches off the 1% or 2% collection under section 153(2A).

Rs. 200 million in section 6A(3). The sub-section says that “notwithstanding the provisions of section 8”, tax under section 6A on a person whose turnover in a tax year exceeds Rs. 200 million “shall be adjustable”. Its proviso lets a person with turnover up to Rs. 200 million opt out of the final tax regime at the time of filing the return for tax year 2027 and onwards. What happens after opting out is on a separate page.

Rs. 8 million in the Sales Tax Act. A cottage industry must be a manufacturing concern with no industrial gas or electricity connection, located in a residential area, with no more than ten workers, and annual turnover from all supplies not exceeding eight million rupees. Section 14(1A) excludes a cottage industry from the duty to register for sales tax, and section 3(7A) makes the sales tax withheld by the payment intermediary or courier its final discharge on digitally ordered goods. It is a sales tax test, not an income tax one.

Rs. 200 million for Tier-1 retailers. Section 3(7A) makes withheld sales tax a final discharge for retailers other than Tier-1 retailers. A retailer above the Rs. 200 million turnover in clause (gb) is Tier-1 and falls outside that rule.

Worked example (illustrative figures)

Zainab sells handmade jewellery from Hyderabad through her own website. In tax year 2027 her sales are small:

• card and bank transfer orders: Rs. 60,000 for the year;
• cash on delivery orders: Rs. 90,000 for the year.

Step 1, digital orders: Rs. 60,000 x 1% = Rs. 600 collected by the payment intermediary.

Step 2, cash on delivery orders: Rs. 90,000 x 2% = Rs. 1,800 collected by the courier.

Step 3, total income tax collected: Rs. 600 + Rs. 1,800 = Rs. 2,400.

Her turnover of Rs. 150,000 is far below every threshold in the table, but tax is still collected on each payment. Her turnover is below Rs. 200 million, so the section 6A(3) proviso gives her the option to leave the final tax regime when she files her return.

What if …?

What if my income is below the basic exemption slab for individuals? Section 6A is a separate charge on gross receipts, not on taxable income, and the collection under section 153(2A) happens regardless. How the tax interacts with the normal slabs once a seller opts out of the final regime is covered on the final or adjustable page.

What if I am not on the active taxpayers’ list? The Tenth Schedule increases the rates of deduction. That is covered on a separate page.

Common mistakes

• Reading Rs. 8 million as an income tax exemption. It is part of a sales tax definition and applies only to manufacturing concerns.
• Reading Rs. 200 million as a registration threshold. Section 6A(3) decides whether the tax is final or adjustable. It does not exempt anyone from section 181 or section 14(1A).
• Expecting the courier to skip small parcels. Section 153(2A) has no minimum amount.

What to check in the official text

Read section 6A(1) to (3) and section 153(2A) of the Income Tax Ordinance as amended to 30 June 2026, and confirm the rates in Division IVA of Part I of the First Schedule. In the Sales Tax Act, read section 2(5AB), section 2(43A)(gb), section 3(7A) and section 14(1A) and (1B). Section 14(1B) also means a marketplace or courier should not accept a seller without an NTN, whatever the turnover.