The National Board of Revenue (NBR) will collect 5.0 per cent Value Added Tax (VAT) on commission from the online businesses on their sales of products, irrespective of VAT-able or VAT-exempt.
The online businesses which procure products paying VAT and have no showrooms of its own will have to pay VAT on their service charge they receive from manufacturers of goods and suppliers of services.
The VAT policy wing of the board on Sunday issued a guideline and clarification in this regard.
Both the online businesses and field-level VAT officials were confused about the process of collecting VAT from the online businesses that was exempt from VAT earlier.
The online businesses work as sales channel for both VAT-able and VAT-exempt products, the instructions said.
As per the instructions, VAT-exempt goods such as essential commodities like rice, pulses, vegetables, fish and meat will have to pay 5.0 per cent VAT on commission or service charge the online platforms receive for selling the items online.
The businesses will have to pay VAT on its commission, fees, service charge, and revenue sharing from online sales.
However, consumers will not have to pay VAT on total prices of a products or service if online sales company collects the products or services after payment of VAT, it said, adding that second time VAT collection from consumers would cause double taxation on the same prices.
The online businesses will have to keep VAT payment documents on the products they procure from the companies paying VAT.
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