Online Marketplaces Show Resentment Over 17 pc Levy on Transactions

Online Marketplaces (OMs) working in the country have shown resentment over the amendments proposed in the Sales Tax Act 1990. Rightly so, these marketplaces are fearing to lose part of their business and it may also lead to the rise of unregistered sellers.

The new Finance Bill intends to bring OMs under the domain of ‘Tier 1 Retailers’ and all online transactions carried out through these platforms would be levied at 17 percent. However, according to the online sale platforms, the authorities must distinguish between online sale platforms and physical sale outlets.

Online Marketplaces Show Resentment Over 17 pc Levy on Transactions

Currently, there are more than 15 platforms that operate as “online marketplaces” in the country, providing an array of products ranging from secondhand items, groceries to other consumer and industrial products.

Daraz Group’s Vice President, Muhammad Imran Saleem said,

The OM business model is adopted globally as e-commerce. This helps empower small and medium enterprises, drives the digital transformation of businesses, and develops the digital ecosystem in a sustainable manner.

Under the new proposed change in the sales tax, the responsibility and burden of gathering and depositing sales tax (as an output tax) has been put on the online marketplace industry. The OMs will be required to begin to issue sales tax invoices on their books for all taxable products processed via their platforms. The OM platforms will receive sales tax invoices from the registered sellers and will have to claim these as input tax in their tax submissions.

Though, if we talk about the unregistered sellers, the OM platforms won’t be able to put a levy on their invoices because of the unregistered nature of the suppliers. Mr. Saleem further said,

Input claims and their mechanics are currently unclear as products attract multiple tax rates which the seller would have charged to an online marketplace.

Moreover, he told that that the online market platforms were at the take-off stage in Pakistan and the new impediments would lead to the mushroom growth of online unregistered sellers, leading to more market frauds and thus deteriorating the name of the industry.

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