Pakistan to Incentivize Digital Payments with Tax Breaks, Penalize Cash

⁣ Updated June 2, 2025
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The Pakistani government is preparing⁣ to roll out differential tax and transaction rates for cash versus digital payments across multiple sectors, including fuel, as part of a broader strategy to combat the cash economy. The ⁢move, hinted at by Finance Minister Muhammad Aurangzeb, is expected to be a key feature of the upcoming budget declaration on June 10.

Sources indicate the budget may also include a minor income tax cut—between 1 and 1.5 percentage points—for the⁣ salaried class. This adjustment aims to signal the government’s intent to ease the tax burden, even if significant reductions aren’t promptly⁤ feasible.

The government is working to support the Federal Board of Revenue (FBR) in documenting retail businesses, an effort that has historically struggled to generate revenue. The anti-cash campaign will encourage both consumers and⁤ businesses to adopt digital transactions by increasing costs for cash payments and reducing costs⁢ for digital methods. The goal is a gradual transition toward a cashless‍ economy where feasible, promoting digital payment adoption and ⁢increasing digital payment openness.

According to an official, all fuel stations nationwide will ⁢be legally required to offer digital⁢ payment options like QR codes, debit and credit cards, and mobile payment services, alongside cash.⁤ Petroleum prices notified by ⁤the government will apply to digital transactions, while cash purchases will incur an additional cost of approximately 2-3 rupees per liter. This cashless economy ⁣initiative aims to promote digital transactions and improve traceability of fuel supplies.

Importers and manufacturers will be required to charge the standard 18% general sales tax (GST) on digital payments,with an additional 2% GST on cash sales.

“We must move towards a cashless economy,” FBR Chairman Rashid Mehmood Langrial said, declining to provide further details before the budget announcement.

The new policy aims to have ⁢a broader reach than previous filer/non-filer banking policies by capturing small⁤ and informal business transactions through incentives and disincentives. The Finance Bill 2025-26 will mandate that all ⁢businesses offer both cash and digital options, with cash transactions subject to an additional tax or fee.

Unlike point-of-sale (POS) systems, the upcoming scheme will also support payments via simple QR codes and other digital ⁤solutions, drawing inspiration from successes in countries like‍ India, Indonesia, and Bangladesh.

What’s next

the dual-pricing mechanism⁣ in the upcoming budget is expected to complement legislative efforts‍ to digitally track petroleum products, providing end-to-end traceability across ⁤the fuel supply chain and combating smuggling and adulteration.