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The federal government is preparing to implement a higher income tax on Cash on Delivery (COD) transactions, compared to digital payments.
This move, proposed under the Federal Budget FY2025- 26, is part of a broader strategy to encourage digital financial practices and reduce cash-based dealings.
During a recent session of the National Assembly Standing Committee on Finance, Bilal Azhar Kayani, Minister of State for Finance, confirmed that
“There will be separate rates for payments made in cash and those made through digital methods.”
He emphasized that the purpose behind this policy is to “discourage the use of cash and support the documentation of the economy.”
Originally, the government had suggested a tax rate ranging from 0.25% to 2% for COD transactions. However, under the revised proposal, the final rate for COD will be higher than that of digital payments, reinforcing the government’s push toward cashless commerce.
Revenue Target and Concerns Raised
The Federal Board of Revenue (FBR) is aiming to generate around Rs. 59 billion from this tax adjustment in the next fiscal year. While the initiative could boost the formal economy, it has sparked concern among lawmakers.
Committee Chairman Syed Naveed Qamar and other members highlighted the need for caution, urging the government to introduce clear safeguards and practical thresholds, especially to protect small businesses and sellers from undue financial pressure.
As the government accelerates its efforts to expand the tax net and promote digital transactions, this tax policy signals a shift toward formalizing Pakistan’s growing e-commerce sector. However, implementation will require a balanced approach to avoid unintended harm to small-scale entrepreneurs who rely heavily on COD services.
