2026 Budget proposal to impose sales tax on non-resident e-commerce sellers
The Federal Board of Revenue (FBR) is considering the introduction of General Sales Tax (GST) on cross-border online sales of goods as part of its 2025–26 federal budget proposals. The initiative is part of a broader effort to tighten tax compliance and address gaps in the digital economy’s taxation framework.
Sellers of foreign digital services are already subject to Pakistan GST. There is already a 1% e-commerce withholding tax.
Closing tax loophole for offshore goods sellers
Currently, non-established businesses—those without a physical presence in Pakistan—are generally not required to register for sales tax. For goods, GST is typically collected at the import stage by the local importer. In the case of services, sales tax is levied through the reverse-charge mechanism on the local recipient. However, there is no formal system in place for registering foreign businesses that render digital services without a local base.
To address these gaps the proposal specifically targets global e-commerce platforms such as Amazon and AliExpress, which facilitate sales in Pakistan without contributing to local tax revenues. Imposing GST on such transactions would help level the playing field for domestic sellers, who currently operate under stricter tax obligations.
The FBR is actively reviewing these suggestions and is exploring models used in other jurisdictions to establish a transparent and equitable tax regime for international e-commerce operations.
Non-resident digital services already taxed
Under current provincial tax laws, nonresident suppliers of digital services—for both B2B and B2C transactions—are already required to register and collect sales tax. However, there are no clear GST rules for cross-border sales of physical goods, creating enforcement and equity challenges.
Additionally, online marketplaces operating in Pakistan are subject to provincial sales tax rules, and since September 2021, a 1% withholding tax on the gross value of supplies applies if the supplier is not classified as an “active taxpayer.”
As e-commerce continues to expand rapidly, the government aims to modernize its tax policies to better reflect the realities of global digital trade. Final decisions are expected in the forthcoming budget announcement.
