Courier Companies Report Decline in Business as E-commerce Taxes Bite

Courier companies are witnessing a slowdown in business countrywide as delivery orders have reduced significantly from their customers in the e-commerce sector. The business volume of courier companies has dropped significantly among mid-sized and small online sellers based in smaller cities, whereas the business coming from major brands has not been affected so far. Cash-on-delivery (COD) volumes have shown a mixed trend. Small shippers or newly registered shippers have faced suspensions. On the other hand, shippers, mostly big brands with proper documentation, have been able to maintain steady volumes. Overall, there has been a short-term dip of 30% to 38% in COD business, according to Abdul Aleem Shaikh, Director of Marketing and Communications at Leopard Courier. In the recent budget, the government made it mandatory for online sellers to register themselves with logistics companies to continue their businesses. Additionally, up to 2% taxes were imposed on cash-on-delivery and digital payments. “In the last month, we’ve observed a noticeable uptick in the number of online traders attempting to register with us while providing NTN (National Tax Number) as required. However, the process has not been entirely smooth, as many small businesses, especially sole proprietors and women working from home, are still unfamiliar with the process of obtaining an NTN or are hesitant due to tax-related concerns,” he added. He pointed out that fiscal measures, such as increased documentation requirements, taxation on COD services, and rising fuel prices, have directly affected logistics companies. Many courier businesses are facing tighter margins due to these rising operational costs and taxation. Major brands in Pakistan with e-commerce platforms are already compliant with regulatory laws, including NTN and other documentation, and hence their business has not been affected. Unfortunately, mid-sized and small online sellers have faced trouble during the registration process, leading to the suspension of their businesses, said Rana Hassan Talal, CEO & Founder of AHL Courier. “The business of small online sellers was suspended for almost two weeks, which caused a drop in the business volume of logistics companies as a trickle-down effect. Many of these sellers have yet to get back on track with the network of courier companies,” he added. The government also imposed a 5% tax on foreign e-commerce platforms such as Temu and AliExpress, but withdrew the taxes after a few weeks. President of the Pakistan eCommerce Association, Shoaib Bhatti, stated that the government is discouraging online businesses through legal means by imposing taxes, particularly in smaller cities. “Local brands are paying income tax, sales tax, and now tax on COD, but taxes on foreign platforms have been removed, which is an utterly unfair move for local players,” he added. A majority of local brands have absorbed the price impact after the taxes on COD, but they are no longer competitive due to the uncompetitive business environment. He urged the government to reduce the taxes on COD to a flat 0.25%, relax the registration period for a few months, and simplify the documentation process for small online sellers.