Prices on global e-commerce platforms like Temu, SHEIN, and AliExpress are expected to drop after the government removed a 5% tax on foreign digital services. The tax, introduced in the 2025-26 budget, had led to significant price hikes. The Federal Board of Revenue (FBR) issued a notification exempting foreign digital platforms from this levy, providing relief to consumers.
FBR Notification Details the Tax Exemption
The FBR’s notification states that the Digital Presence Proceeds Tax will no longer apply to digitally ordered goods and services supplied from outside Pakistan. The exemption, effective from July 1, 2025, was granted under Section 15 of the Digital Presence Proceeds Tax Act, 2025. This move aims to facilitate international trade and ease financial burdens on consumers relying on foreign platforms.
Tax Removal Linked to Trade Deal with the U.S.
The government’s decision to withdraw the tax is part of efforts to finalize a trade agreement with the U.S. By eliminating the 5% levy, Pakistan aims to improve trade relations and attract foreign investment. The exemption applies to all foreign digital service providers, benefiting major platforms like Temu, SHEIN, and AliExpress, which have gained popularity among Pakistani shoppers.
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Impact on Consumer Prices
While the removal of the 5% tax will reduce prices, an 18% sales tax remains in place. This means costs will not return to pre-budget levels. Consumers had faced steep price increases after the budget, making imported goods more expensive. The partial relief is expected to ease financial pressure but may not fully restore affordability for many buyers.
Previous Taxation on Foreign Digital Platforms
Before the exemption, foreign e-commerce platforms faced a dual tax burden: a 5% digital presence tax and an 18% sales tax. The combined taxes had significantly raised product prices, discouraging shoppers. The government’s latest decision addresses only the 5% levy, leaving the sales tax unchanged, which continues to affect overall pricing.
Future Implications for E-Commerce in Pakistan
The tax exemption may boost the competitiveness of foreign platforms in Pakistan’s growing e-commerce market. However, the remaining 18% sales tax could still limit affordability. Policymakers may need to reconsider broader tax reforms to balance revenue generation with consumer accessibility, ensuring sustainable growth in digital trade.
Conclusion: A Partial Relief for Shoppers
The government’s decision to remove the 5% tax on foreign digital platforms offers partial relief to consumers. While prices will decrease, the persistent 18% sales tax means affordability remains a challenge. This move highlights the need for balanced taxation policies that support both economic growth and consumer interests in Pakistan’s evolving digital marketplace.
