UPDATE: this measure since replaced by 2% Withholding VAT on marketplaces from 1 September 2021.
Pakistan’s budget includes provisions to bring online marketplaces into the federal sales tax net. They will become responsible for levying and collecting the 17% sales tax. The new measure will come into effect on 1 July 2021 in time for the 2021/22 budget year.
For Pakistan, marketplaces will be defined as:
- Electronic portals
- e-commerce platforms
- Online marketplaces
Pakistan is hoping opening the tax liabilities will help it repair its expanding budget deficit in the wake of the COVID-19 pandemic. It is also looking to level the playing field for domestic websites which have been losing business to non-resident marketplaces who have been able to charge without sales tax.
Many other countries around the world have initiated this revenue raising responsibility on e-commerce goods and service platforms, as well as increasingly gig or sharing economy platforms.
VAT Calc’s global VAT and GST on digital services blog keeps a live update on how countries are imposing indirect taxes on non-resident providers and electronic marketplaces.