Pakistan’s e-commerce sector has exploded in recent years—what was once a niche corner of the internet is now a multibillion-dollar marketplace. In 2024 alone, it generated around $5 billion to $7.7 billion in sales, depending on the source, with growth rates ranging from 15% to 20%. Projections for 2025 expect the market to grow by 10% to 15%, with longer-term forecasts predicting a steady rise to about $6.7 billion by 2029. This surge is driven by increasing smartphone penetration—now exceeding 60% of the population—and a growing comfort with online shopping.
Today, Pakistan boasts over 60,000 online stores, selling everything from clothes to electronics. Clothing alone makes up nearly 28% of these businesses, making it the largest e-commerce category in the country.
But just as this digital marketplace was hitting its stride, the 2025–26 federal budget introduced a series of new tax measures that could disrupt the momentum—particularly for independent vendors and home-based entrepreneurs who form the backbone of this sector.
What’s Changing with the New Tax Regime?
The government has introduced new taxes that will apply to almost every e-commerce transaction. Local platforms will now pay between 0.25% and 2% tax on each sale, depending on the product category and mode of payment. For example, if someone buys electronics using cash on delivery, the seller will owe 0.25% tax. But for clothing, that tax jumps to 2%.
On top of this, an 18% sales tax will apply to all online transactions—collected by courier companies or banks when the product is delivered. Foreign platforms like Amazon and AliExpress will also be taxed 5% on sales made to Pakistani buyers. Even international companies running social media ads targeting Pakistanis will face a 5% tax on ad spend.
To enforce these rules, all online sellers must register under the Sales Tax Act. Sellers who don’t comply risk fines up to Rs1 million. Additionally, courier companies and banks are now responsible for deducting and remitting taxes from payments, while digital platforms must report advertising revenues to the Federal Board of Revenue every quarter.
Why it Matters for Independent Sellers
This is where things get tough. Small businesses and home-based sellers are already managing tight margins, unreliable logistics, and a customer base that still prefers cash on delivery for about 75% of purchases. Now, they also have to navigate complex tax filings, new registration requirements, and upfront deductions.
Pakistan’s e-commerce still accounts for just 2% of the total retail market, but it’s growing fast. If independent sellers can’t absorb the new costs or manage compliance, many may be forced to shut down—or return to informal selling methods. That would shrink the diversity and accessibility that online shopping offers today.
Imagine a home-based clothing seller who, until now, managed modest sales with minimal paperwork. Now, with new tax deductions and registration hurdles, she faces tough choices—scale up, hire help, or risk shutting down.
Could These Policies Backfire?
The government’s goal is clear: broaden the tax base and formalize the digital economy. But there’s a real risk these policies could have the opposite effect.
While some reports peg 2024 sales at $7.7 billion, others forecast a slight dip to around $5 billion in 2024 and $5.9 billion in 2025, reflecting differing methodologies and market conditions. Monthly revenues hover around $480 million as of mid-2025. If tax burdens and compliance costs become overwhelming, it could stifle growth, discourage new sellers, and push customers away due to rising prices.
Instead of generating more tax revenue, these measures might unintentionally slow the sector down and drive businesses further into the informal economy—making them harder to regulate and even harder to tax in the long run.
What’s Next for Pakistan’s Digital Marketplace?
Pakistan’s e-commerce story is still unfolding. With a young, digital-savvy population and improving internet infrastructure, the potential remains enormous. But the road ahead hinges on how the government manages this transition.
Striking the right balance is key. Simplified tax rules, clearer guidance, and tiered policies that accommodate micro and small businesses could help maintain momentum. A blanket approach risks undermining the very ecosystem the government is trying to formalize.
Will Pakistan pave the way for a thriving digital marketplace—or let bureaucracy stall one of its most promising sectors? The next few months could define the answer.
Written by: Abdullah Sulehri
Multi-Channel Marketing Strategist | PR & Influencer Marketing | Twitter (X) Trendsetter
