In a push to tighten regulation of cash transactions and nudge businesses toward digital payments, the Federal Board of Revenue (FBR) has introduced a Rs200,000 ceiling on cash payments at retail outlets as well as on cash-on-delivery (CoD) purchases in e-commerce.
The restriction, outlined in Income Tax Circular No. 02 of 2025-26, extends the same limits that already apply to brick-and-mortar stores to online purchases paid in cash. Officials say the move is part of the government’s broader strategy to formalize the economy and reduce reliance on cash.
New Tax Rules for Online Transactions
Alongside the cash limit, the FBR has rolled out new tax rules covering e-commerce. Under Section 6A of the Income Tax Ordinance, 2001, all domestic digital transactions — whether processed through online marketplaces (OMPs) or independent websites — will now attract withholding taxes.
- Payment intermediaries such as banks, forex dealers, and digital gateways must deduct 1% tax on electronic transactions.
- Courier companies handling CoD deliveries will withhold 2% tax before passing funds on to sellers.
These taxes will be considered final on income generated from both domestic and export sales.
Compliance Burden Shifts to Platforms and Couriers
The responsibility for tax collection and reporting no longer rests solely with sellers. Couriers and OMPs have been formally tasked with ensuring compliance:
- Couriers are now designated as withholding agents under the sales tax regime, making them accountable for collecting and depositing taxes on CoD transactions.
- Marketplaces must report vendor activity and cannot host unregistered sellers.
- Both intermediaries and couriers are required to file monthly statements with the FBR.
Non-compliance carries penalties, including fines for failing to withhold or remit taxes.
Why It Matters
Pakistan’s e-commerce sector has grown rapidly, fueled largely by CoD payments. While convenient, heavy reliance on cash has limited transparency and tax collection. By imposing limits and shifting tax obligations to couriers and platforms, the FBR is attempting to capture more taxable activity and reduce the shadow economy.
Industry players, however, may face added compliance costs and administrative hurdles. For sellers, especially small vendors who depend heavily on CoD, the new framework could increase barriers to entry unless digital adoption keeps pace.
