FBR Makes E-Commerce Platforms Responsible for Withholding Sales Tax

To facilitate effective tax collection in the e-commerce sector, the Federal Board of Revenue (FBR) has implemented a system in which sales tax on digitally ordered goods is withheld at source.

This responsibility falls on intermediaries (withholding agents) such as Payment Intermediaries, Courier Companies, and Online Marketplaces.

The FBR has issued a user manual to assist Payment Intermediaries, Courier Companies, Online Marketplaces, and other relevant stakeholders. The manual provides detailed instructions on fulfilling statutory responsibilities through IRIS, including e-payment creation, PSID and CPR generation, submission of monthly withholding statements, and claiming admissible sales tax credits.

According to the FBR, this initiative will promote accuracy, consistency, and procedural compliance across all stages of sales tax withholding on digitally ordered goods.

The objective is to empower withholding agents and stakeholders to manage sales tax on digitally ordered goods with accuracy, efficiency, and transparency. The manual clarifies responsibilities, provides guidance for proper utilization of the IRIS system, and ensures that all statutory obligations are met in a timely and consistent manner.

The document emphasizes clarity, consistency, and informed decision-making, enabling withholding agents and other stakeholders to contribute to a transparent, reliable, and well-coordinated e-commerce taxation ecosystem.

This manual is intended for Payment Intermediaries, Courier Companies, Online Marketplaces, and other stakeholders responsible for withholding and reporting sales tax on digitally ordered goods.

Monthly Statements by Payment Intermediaries/Courier Services for Digitally Ordered Goods:

Payment Intermediaries and Courier Services are responsible for withholding and reporting sales tax only on the amounts they collect or settle. Consequently, their withholding statements reflect solely the payments handled through their respective systems. The withholding statement for all withholding agents is auto-populated from the CPR data of the relevant Payment Intermediary or Courier Service.

Monthly Statements by Online Marketplaces for Digitally Ordered Goods:

In contrast to Payment Intermediaries and Courier Services, the statement for Online Marketplaces reflects the aggregate amount of all transactions, including payments processed through both Payment Intermediaries and Courier Services. The Online Marketplace’s monthly statement is generated based on the monthly statements submitted by the Payment Intermediaries and Courier Services.