E-commerce platforms to face 18% tax, online, COD orders no longer tax-free

The federal government has proposed new tax measures targeting the growing e-commerce sector as part of the 2024–25 federal budget.

Finance Minister Muhammad Aurangzeb, during his budget speech on Tuesday, announced that businesses operating online will now be subject to taxation. This includes the sale of goods and services conducted through websites, mobile apps, or online marketplaces.

According to the proposed amendments, e-commerce transactions, both goods and services ordered digitally, will be taxed. Couriers and e-commerce logistics providers will be responsible for collecting an 18% tax on behalf of the government from online platforms.

Additionally, e-commerce businesses will be required to submit monthly transaction data and tax returns.

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For digital transactions, new tax rates based on payment amounts have been outlined:

• 1% tax on payments up to Rs10,000
• 2% tax on payments between Rs10,000 and Rs20,000
• 0.25% tax on payments exceeding Rs20,000

In the case of cash-on-delivery (COD) payments, the tax will vary based on the item category:

• 0.25% for electronics
• 2% for clothing
• 1% for all other items

Payment gateways will deduct the applicable tax at the time of digital payment processing. For COD orders, courier services will be responsible for collecting the tax-inclusive amount directly from customers.

These measures are part of the government’s broader strategy to formalise the digital economy and expand the tax net.