The internet, while reshaping the world’s conventional processes of buying and selling methods, has been taken over by the online hybrid module all over the world. The impeccable and appreciative results of the online market processes had left historical marks in the trend of commerce and propagated the new field of e-commerce. This newly introduced way of commerce is adapted by many developed countries and regarded as a potential source of lucrative and stable income. In the most testing times of the centuries, the Covid-19 pandemic, consumers preferred the online merchandise mode. In the race of adopting the modern trends of the prevailing era, Pakistan is also holding the baton to adhere to the international conventions formulated in this regard such as the United Nations Convention on Trade And Development 2002 (UNCTAD). The sole purpose of the convention is to extend the proficiency of emerging countries in areas of trade, investment, and development, especially e-commerce and matters related thereto. As per UNCTAD, 81% of countries have electronic transaction laws. Similarly, 59% of countries in the world have their consumer protection laws, 71% have privacy laws enforced, and 80% have their own cybercrime laws. In Pakistan, e-commerce trends are mostly visible in Business to Consumer modules (B2C). Cyber laws are continually evolving to match the pace of international standards to make good space for modern e-commerce to fit in. But the people of Pakistan are still reluctant to adopt this mode of commerce, especially when it comes to cross-border trade, as they only recall the hearsay fraud stories about online transactions. In the process of updating old laws and adopting new international legislation to make people confident enough to trade on online electronic platforms, Pakistan worked to formulate its e-commerce policy in 2019, with the goal of developing regulatory facilitation, digital infrastructure for trade payments, encouraging citizens and SMEs to earn through electronic means, ensuring just taxation and revenue generation for the government, providing e-commerce dependents the best ICTs, reliable logistics, and addressing personal data and data localization issues. The Policy is not limited to physical goods and services but also includes digital products through electronic transactions conducted via the internet or other computer-mediated networks. Being a signatory of the UNCITRAL Model Law on Electronic Commerce (1996), Pakistani legislation has started to work on data protection laws, cybercrime laws, consumer protection laws, and electronic transaction laws.

The establishment of a corporate body for running an e-commerce business in Pakistan is only possible if there is a physical address or registered office, as per Section 21 of the Companies Act, 2017. Incorporation of companies for overseas companies and Venture Capitalists (VCs) is also eased, subject to security clearance. To carry out different operations, companies are required to obtain licenses from the respective regulatory authorities. One of the biggest challenges of the time is managing cross-border transactions, keeping many things into consideration. The operation of tax laws over the influx of revenue in Pakistan also needs to be revisited and specifically designed to provide maximum leverage to citizens, giving them confidence to take initiative in global e-commerce. The Federal Board of Revenue, by virtue of the Income Tax Ordinance, 2001, imposes various taxes on income as per determined slab rates, some of which have been minimized and related to a zero-tax regime. Tax on services of companies or entities is also catered for by provincial statutes — rates of sales tax (VAT) on services in Punjab, Sindh, Khyber Pakhtunkhwa, and Baluchistan are 16%, 13%, 5%, and 15% respectively. Procedures for filing sales tax returns are also cumbersome and complicated; however, this is very important, given that online business transactions have data recorded in digital format. Importing products from third parties is also a burdensome exercise, as the Customs Act, 1969 and related third-party logistics costs incurred can be costly. In e-commerce, logistics includes but is not limited to the whole process of shipping orders to customers or transporting inventory to a merchant. Around the world, the logistics process keeps customers and merchants informed of the tracking of goods in transit through to destination. The current situation of customs duties and rates also needs consideration to be minimized, making the whole process cost-effective and efficient to enable newcomers into the field of e-commerce.

In Pakistan, the absence of a codified data protection law also creates hurdles for e-commerce aspirants. Pakistani laws related to data protection exist in different fragments. For example, Section 41 of the Prevention of Electronic Crimes Act, 2016 prohibits confidential information from being handed over to any other entity. Similarly, provisions of Section 115D of the Customs Act 1969, the Electronic Transaction Act 2002, and PTA’s Anti-Spam Regulations also exist to ensure personal data protection. Moreover, the Personal Data Protection Bill 2021 invited consultations from major stakeholders to give input in the formulation of a single, comprehensive data protection law in Pakistan. It is expected that the law should follow the guidelines issued under the UK’s GDPR. Pakistan presently lacks legislation to safeguard data localization. Only in the banking sector, due to strict privacy provisions under the State Bank of Pakistan’s various regulations, is consumer data restricted from transfer, subject to existing laws in Pakistan specifically for that purpose.

Ensuring consumers are protected under the law requires extending the ambit of the Consumer Protection Acts of all provinces. Activation of the Consumer Protection Council is also a need of the hour. Adoption of the e-commerce model of merchandise is subject to consumer acceptance and satisfaction. The eradication of issues and quick redressal of grievances is very important to ensure the efficiency and effectiveness of e-commerce, and is part and parcel of its success in Pakistan.

In conventional shopping, the market accepts consideration for the sale of goods and services in the form of hard cash/money, subject to the nature of the currency of the country where the shopping is actually taking place. When it comes to e-commerce, exchange of money in the electronic medium becomes an issue. Customers are reluctant to spend money due to apprehension of fraud or financial scams. Cross-border payment usually appears to be a big cut on the pocket without any surety of recourse against the seller in case of faulty inventory. Many attractive and unique articles are unable to be purchased because the mode of payment or digital payment is neither recognized by the seller nor by the State Bank. Pakistani laws such as the Payment System & Electronic Funds Transfer (PS&EFT) Act 2007, Payment System Operator and Payment Service Provider (PSO/PSP) Rules 2014, and other State Bank regulatory frameworks for foreign or cross-border fund transfers need to be devised in a broad and effective manner to enable digital payment transactions with vendors/companies across Pakistan. International Payment Gateways like VISA and MasterCard are already recognized in Pakistan and operate under government rules and regulations, facilitating merchants for e-commerce transactions, both locally and cross-border. Moreover, cross-border payment gateways or other systems for catering to the influx of payments need to be established for e-commerce trade in Pakistan, for which Cash on Delivery should be equally discouraged by giving subsidies on online transactions through different payment gateways and by minimizing tax-related issues on an urgent basis. A code of conduct for the operation of e-commerce companies and entities is also a way to ensure clean and fair competition. The code of conduct should include but not be limited to disclosure requirements, consumer protection, compliance with applicable laws, and other relevant aspects of a fair market. Intellectual property — patents, trademarks, and copyrights — requires consideration and attention to be made smooth, expedited, and user-friendly so that companies can obtain registration in a time-saving manner, for which amendments in the Trademark Ordinance, 2001, Copyright Ordinance 1962, and Patent Ordinance, 2000 are needed.

The upshot of the above is that, entering the tech-era of e-commerce, the adoption, application and execution of new policies, and rephrasing of laws could be an omen for the economy of Pakistan. The potential source of a handsome income is only possible if the important legislation and enactments enable the operations of different companies and entities to grow and evolve in Pakistan.