The Federal Board of Revenue (FBR) has announced new regulations for Pakistan’s e-commerce sector as part of the 2025–26 income tax circular. Under the new rules, Cash on Delivery (CoD) orders are now capped at Rs 200,000, a limit that will also apply to retail outlets across the country.
The move is designed to encourage digital payments and bring more transparency into online and offline transactions. By setting this cap, the government aims to gradually shift consumer behavior from cash-based dealings toward digital solutions, which are easier to monitor and regulate.
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In addition to the CoD restrictions, the circular introduces new taxation measures. A 1% withholding tax will apply to all digital transactions processed through websites, apps, and marketplaces, while CoD orders will carry a 2% tax.
To ensure compliance, e-commerce vendors must register for income tax and report details of platform vendors using their services. FBR officials have stated that non-compliance will result in strict penalties, reflecting the government’s intent to formalize Pakistan’s fast-growing online marketplace.
Industry experts believe this step could be a turning point for Pakistan’s digital economy. By promoting electronic payments, the government seeks to expand the tax base, reduce the informal economy, and increase overall transparency in business operations.
However, some vendors and small businesses have expressed concerns over the impact on consumer behavior, as many buyers in Pakistan still prefer CoD. Analysts suggest that parallel efforts, such as improving digital payment infrastructure and ensuring security, will be necessary to make the transition smooth.
FAQs
1. What is the new Cash on Delivery limit introduced by FBR?
The limit is Rs 200,000 per order for both e-commerce and retail outlets.
2. What taxes apply to digital and Cash on Delivery transactions?
A 1% withholding tax applies to digital payments, while Cash on Delivery orders carry a 2% tax.
3. Why has FBR introduced these rules?
The aim is to promote digital payments, improve transparency, and broaden the tax net.
4. Do e-commerce vendors need to register for tax?
Yes, all vendors must register for income tax and report platform vendors.
5. What happens if businesses don’t comply?
Non-compliance will lead to penalties and possible legal action under FBR’s enforcement framework.
