E-commerce sector: FBR implements new system for tax collection

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

This responsibility falls on intermediaries (withholding agent) such as payment intermediaries, courier companies & online marketplaces.

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

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The FBR has explained the mechanism where intermediaries deduct sales tax at source from payments made to suppliers for digitally ordered goods and remit it to the FBR. The system automatically calculates sales tax as a percentage of the invoice value submitted by the supplier.

The FBR Wednesday issued a user manual to assist Payment Intermediaries, Courier Companies, Online Marketplaces, and other relevant stakeholders. It provides detailed instructions on executing statutory responsibilities through IRIS, including e-payment creation, Payment Slip ID (PSID) and Computerized Payment Receipt (CPR) generation, submission of monthly withholding statements, and the claiming of admissible sales tax credits.

It will promote accuracy, consistency, and procedural compliance across all stages of sales tax withholding on digitally ordered goods, FBR said.

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

TheFBR 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

Monthly statement 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 the withholding agents is auto-populated from CPR data of the relevant PI and Courier Service.

Monthly Statement by Online Marketplace for Digitally Ordered Goods: In contrast to PI & Courier Services, the statement for Online Marketplaces reflects the aggregate amount of all transactions, including payments processed through both Payment Intermediaries and Courier Services, as Online Marketplace’s monthly statement is generated on the basis of monthly statements submitted by the payment intermediary and courier services.

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