Aitizaz Hassan

ISLAMABAD, Aug 4, (INP-WealthPK): The stakeholders have urged the government to take concrete steps and give them incentives for the promotion of e-commerce in Pakistan, WealthPK reports.

In a report, the Pakistan Software House Association (P@SHA) has asked the government to impose a sales tax on third-party logistics (3PL) service providers for ‘cash-on delivery’ sales to discourage the manual mechanism of transactions.

It said that about 90 percent of e-commerce orders were fulfilled through the ‘cash-on-delivery’ method. It added that courier service providers processed the cash payments on behalf of the e-commerce traders which might not be fully documented.

The report said that no additional tax should be imposed for five years on the sector to avoid discouraging the sellers as well as encourage all courier and logistics service providers to find ways to continue their business.

It said that transactions conducted through any digital mode of payment must be encouraged to gradually shift the formal sector towards e-commerce. Currently, transactions conducted through the digital mode of payment are subject to a variety of financial frictions.

“Transaction cost is in the form of merchant discount rate, which is chargeable by financial institutions such as banks at the rate of one to three percent of the total value of transaction when paid through credit/debit card or other digital means,” said the report.

It said that the implementation of rates and regulations of general sale tax (GST) and income tax as partial measures would not achieve the desired results of growth in digital payments. It said that GST should be reduced from 17 percent to five percent for five years to increase documentation of online and offline retail transactions. The payments should be made digitally in line with the measures taken by Punjab Revenue Authority, it added.

“The merchants selling their products through websites and online marketplaces by conducting their business transactions through third-party logistics services are reluctant to get their transactions documented owing to high taxes,” said the report.

It said that any step to document businesses and transactions should be taken along with the comprehensive rationalisation of federal and provincial tax rates. The regulations should also be applicable to courier companies and merchants, it added.

The report said that the imposition of a two percent sales tax on marketplaces caused double-taxation, hindering the business of small traders. It said that small traders were shifting their business to social commerce and micro-websites.

“Ordinary shopkeepers are legally not required to be registered for sales tax. They are already paying taxes through the payment of their electricity bills. The current GST regime is equivalent to double taxation, which needs to be rationalized,” said the report, available with WealthPK.

It said that government should introduce a cash rebate against merchant discount rate charges applicable to digital mode of payment whereby the transaction cost for the supplier was reduced by the Ministry of Commerce.

Credits: Independent News Pakistan—Wealthpk