ISLAMABAD:
In a highly unusual move, the government has proposed to extract Rs64 billion in the next fiscal year by taxing the digital, online platforms as well as courier services, which may discourage digitalisation of the economy and youth of the country.
From 0.25% to 5%, the new tax has been imposed on digital service providers, e-commerce platforms, websites, social media platforms and poor courier doing business of delivering goods at homes and receiving cash on delivery.
The government has defined the digitally delivered services as any service delivered over the internet or electronic networks, where the delivery is automated and requires minimal or no human intervention including music, audio and video streaming services, cloud services, online software application services, services delivered through online interpersonal interaction, ie, telemedicine, e-learning etc, online banking services, architectural design services, research and consultancy reports, accounting services in the form of digital files or any other online facility.
E-commerce has been defined as the sale or purchase of goods and services conducted over computer networks by methods specifically designed for the purpose of receiving or placing orders either through websites, mobile applications or online marketplaces having digital ordering features by using either mobile phones, iPads, Tablets or automated computer-to-computer ordering systems.
The government has introduced a new law whereby it will charge every foreign vendor having significant digital presence in Pakistan in the name of Digital Presence Proceeds Tax on proceeds of every supply made from outside Pakistan of digitally ordered services or goods, irrespective of whether delivered digitally or physically. It has proposed a 5% tax on digital services.
These foreign vendors will be liable to provide client-wise information of local vendors or foreign vendors with or without a permanent establishment whose advertisements are relayed in Pakistan through their platform and the amount received. Banks will be required to deduct the 5% tax.
On the use of local online platforms, the government will charge a 1% tax where the amount does not exceed Rs10,000. Where the amount paid does not exceed Rs25,000, the rate will be 2% and where the amount exceeds Rs25,000, the tax rate will be 0.25%.
Likewise, the government has introduced a new tax on cash on delivery by courier services. On the supply of electronic and electrical goods, the rate is 0.25%, on clothing articles, 2% of the gross amount will be charged and on other goods, the rate is 1% of the value.
The government has also proposed fines on allowing unregistered persons to use online platforms without registering with the FBR. Where an online marketplace allows an unregistered vendor, whether resident or non-resident involved in e-commerce business supplying digitally ordered goods or services, who is required to register under the Sales Tax Act 1990 and Income Tax Ordinance 2001, under Section 181 before using the platform, he will be liable to a fine of Rs1 million.
Where a banking company, payment gateway or courier service provider, as the case may be, fails to deduct tax at the time of making payment to a seller, or fails to pay the tax deducted as required under Section 160, with respect to digitally ordered goods or rendering or providing digitally delivered services using an e-commerce platform, he will be liable to a fine equal to 100% of the tax involved in the transaction.
