The Online Marketplaces (OMs) running in Pakistan have responded strongly against the revisions suggested in the Sales Tax Act 1990, worrying that the majority of businesses would move away from these online sale platforms and grant rise to unregistered sellers.
Furthermore, the Finance Bill proposed to set OMs under the description of ‘Tier 1 Retailers’, and all purchases carried by these platforms would be taxed at 17 percent. However, the online business platforms declare that authorities have to distinguish between online sale platforms and physical trade outlets. There are over 17 platforms that operate as “online marketplaces” in the nation, proposing a wide range of products from used items, groceries to other customers and manufacturing products.
“The OM business model is adopted globally as e-commerce. This helps empower small and medium enterprises, drives the digital transformation of businesses, and sustainably develop a digital ecosystem,” said Daraz Group’s Vice President Muhammad Imran Saleem.
Under the OM model, the title of the goods resides with the seller and not the Online Marketplace. While every seller has its ratings so that all clients can see the seller’s fulfillment and security to secure an equipped acquiring decision. Following the latest proposed amendment in the sales tax, the onus and responsibility of securing and depositing sales tax (as an output tax) has been ordered on the online marketplace industry.
Moreover, the OMs will be required to begin issuing sales tax invoices on their records for all dutiable goods processed by their platforms. The OM platforms will get sales tax statements from the enrolled sellers and will have to claim these as input tax in their tax submissions. Though, in the matter of unregistered dealers, the OM platforms will not be able to input tax on the invoices due to the unregistered quality of the suppliers.