Govt ends 5% digital tax on foreign online shopping

The federal government has abolished the five per cent tax on goods and services ordered digitally from abroad, a move that is likely to benefit global tech giants such as Google and Chinese e-commerce platform Temu.

According to the issued notification, the digital tax will no longer apply to goods and digital services purchased from abroad and sent to Pakistan. A 5 percent tax exemption is now applicable on all goods and services purchased digitally from international platforms, effective July 1, 2025. This move aims to ease the financial burden on consumers and support the country’s growing e-commerce industry.

Government officials explained that this decision will benefit not only regular online shoppers but also freelancers and small businesses that rely on digital services from international providers. The exemption covers both physical goods bought through online platforms and digital services such as software, cloud storage, and design tools. Officials added that the goal is to promote ease of doing business in the digital sector and encourage more global transactions through legal and traceable channels. As the digital economy expands, the government hopes to attract more investment and participation from small and medium-sized enterprises.

Experts believe this decision will boost the confidence of Pakistani freelancers and entrepreneurs, who often depend on foreign tools and platforms to run their operations efficiently. It also reduces the overall cost of business for startups and digital service users in the country. The FBR has stated that the exemption is part of a broader strategy to support digital growth and modernize the tax framework in line with global standards. Authorities expect that this change will also help increase formal online trade and improve documentation of digital transactions.