New Tax Alert! Govt Targets Temu, Google & Others Under Digital Law

ISLAMABAD: In a bold move to tighten its grip on the growing digital economy, the National Assembly Standing Committee on Finance and Revenue has approved the Digital Presence Proceeds Tax Act, 2025, paving way for the introduction of a 5% tax on proceeds from digitally ordered goods delivered by foreign vendors such as Temu and Google.

The parliamentary panel, chaired by Syed Naveed Qamar, was informed that the proposed legislation aims to protect Pakistan’s taxing rights in the digital marketplace. Under the Act, payment intermediaries, including banks and financial institutions, will be tasked with collecting the tax on digital payments made to foreign suppliers shipping goods into Pakistan.

Temu reportedly earned Rs4 billion from Pakistani consumers without paying any income tax, which sparked strong support for this new framework.

The new tax mechanism does not apply to digital services, but will cover product-based transactions, including digital advertisements targeting the local market. For example, platforms like Google promoting vendors such as Temu will now come under the tax net to ensure consistency with Pakistan’s tax laws.

Panel Rejects 18% Sales Tax on Solar Panel Imports

During the session, the committee unanimously rejected the controversial proposal to impose 18% sales tax on imported solar panels, citing public backlash and the urgent need for renewable energy amid soaring electricity costs. FBR Chairman Rashid Mahmood Langrial admitted that removing the less-than-18% tax rates on motor vehicles would result in price hikes, although electric vehicles remain exempt under current regulations.

The FBR chairman also revealed that the over-invoicing of Rs65 billion in solar panel imports has been identified, which qualifies as money laundering and has contributed to capital flight from the country.

Committee members across party lines strongly opposed any new tax on solar energy, arguing it would undermine the national shift toward renewables. MNA Mirza Iftikhar noted that locally manufactured solar panels remain substandard and costlier than imports, further weakening the case for higher taxes.

Meanwhile, Finance Minister Muhammad Aurangzeb said some committee recommendations are under review, signaling potential adjustments before the final budget approval. Committee member Shahram Khan Taraki called for a technology transfer policy to support local manufacturing alongside imports.

Under Pakistan’s IMF commitments, the FBR clarified that reduced sales tax rates will be adjusted upwards. Products currently taxed above 5% may face increases to 10%, and those above 10% could be taxed at 18%, significantly affecting motor vehicle prices in the upcoming fiscal year.