CAP warns several compliance-heavy proposals aimed at domestic e-commerce could unintentionally harm the formal retail sector and undermine Pakistan’s growing digital economy if not revised
LAHORE: (UrduPoint/Pakistan Point News-June 17th, 2025) The Chainstore Association of Pakistan (CAP) on Tuesday expressed serious concern over the absence of meaningful retail tax reforms in the Finance Bill 2025–26.
CAP also warns that several compliance-heavy proposals aimed at domestic e-commerce could unintentionally harm the formal retail sector and undermine Pakistan’s growing digital economy if not revised.
While supporting the government’s objectives of expanding the tax base and formalising the economy, CAP believes inconsistent and short-sighted policies have disproportionately burdened tax-compliant retailers integrated with the FBR-POS system. The absence of a clear, 3-to-5-year taxation roadmap—developed in consultation with stakeholders—further fuels uncertainty.
“This year, the retail ecosystem hoped for a strategic, long-term approach in the Finance Bill,” said CAP Chairman Asfandyar Farrukh. “Instead, we see a repeat of past practices. Our proposals to support formal retail growth and encourage broader documentation have been ignored.”
Despite its contributions, organised retail comprises just 10% of Pakistan’s retail and wholesale trade—far below the 15–20% share in peer economies. Informal competition, rising compliance burdens and unbalanced enforcement continue to suppress growth, investment and employment in the sector.
CAP Patron-in-Chief Tariq Mehboob noted that last year’s removal of the GST concession for customers of tax-compliant retailers further tilted the playing field. “Schemes like Tajir Dost failed due to poor planning and lack of stakeholder input. There’s still time to revise the Finance Bill before finalisation. Without action, we risk losing another year without true reform.”
To promote digital payments and documentation, CAP has recommended reduced GST rates for consumers transacting digitally with any retailer, regardless of size. These rates—supported by simplified compliance and building on the success of Provincial incentives—would cut costs, encourage formalisation and reduce reliance on cash.
CAP also proposes a fixed quarterly advance income tax regime for small retailers, payable via branchless banking and adjustable against annual filings. A stable 3–5-year tax framework, combined with incentives such as cashback and service benefits at NADRA and passport offices, could build trust and encourage SME registration.
Pakistan’s e-commerce sector has grown over 35% annually, empowering more than 100,000 micro and small sellers, generating jobs in tech and logistics, and facilitating over PKR 538 billion in digital payments in 2024, according to the State Bank. CAP supports positive steps such as the 5% digital presence levy on imported goods sold via foreign platforms like Temu, as well as the introduction of e-commerce transaction reporting for documentation.
However, CAP cautions that other tax compliance measures proposed in the Finance Bill risk reversing these gains. Major concerns include blanket sales tax withholding from already documented businesses without allowing input adjustment, mandatory sales tax registration for micro-sellers (particularly affecting youth and women entrepreneurs), and complex, multi-rate income tax withholding for platforms, payment providers, and courier services. CAP warns these policies could create operational bottlenecks, complicate payment recovery, and raise compliance costs across the value chain.
CAP urges the Ministry of Finance, the Federal board of Revenue, and the Ministry of Commerce to pause implementation and urgently consult with multiple stakeholders—particularly online sellers, platforms, and service providers. CAP’s key recommendations are: Limit 2% sales tax withholding to non-ATL sellers only; accept income tax registration as sufficient for small, home-based online sellers; Simple single-rate income tax withholding at 0.25%; Restructure penalties to promote, not punish, compliance; Rationalise provincial taxes on essential digital services; and a transition period of at least 2-3 months for e-commerce businesses to adjust. The trade body has reiterated its commitment to responsible taxation and documentation, and offers full cooperation in developing a fair, modern tax regime for Pakistan’s digital economy.
