E-COMMERCE
UNDER THE LENS OF LAW
By:
[1]SARDAR FARRUKH MUSHTAQ
Advocate High Court
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 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 the UNCTAD, there are 81% of the countries
have electronic transaction laws. Similarly, 59% of the countries in the world
have their consumer protection laws, 71% of the countries have their privacy
law enforced and 80% of the countries have their own cybercrimes laws. In
Pakistan, the 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 a good space for
modern e-commerce to fit in. But the people of Pakistan still are reluctant to
adopt the mode of commerce especially when it comes to cross-border trade as
they only recall the hearsay fraud stories in online stories. In the process of
updating the old laws and adopting the new international legislations to make
people enough confident for trading on the online electronic trade and
commerce, Pakistan had worked to formulate its e-commerce policy in 2019 with
the goal to focus on developing regulatory facilitation, digital infrastructure
for the payments made in trade, encouraging the citizens and all Small-Medium
Enterprises to earn by adopting the electronic ways, making possible just
taxation and generation of revenue for the government, provide the e-commerce
dependents the best ICTs, reliable and issueless logistics and personal data
related issues along with the data localization. The Policy doesn’t limit
itself to physical goods and services but also includes digital products
through electronic transactions conducted via the internet or any other
computer-mediated networks. Being a signatory of UNCITRAL Model Law on Electronic Commerce (1996), Pakistani
legislation had started to work on, data protection laws, cybercrime laws,
consumer protection laws, and electronic transaction laws.
The
establishment of the corporate body for running the business of e-commerce in
Pakistan is only possible if there is a physical address or registered office
as per section 21 of the Companies Act,
2017. The incorporation of the companies in Pakistan for the overseas
Companies and Venture Capitalists (VC) are also eased subject to the security
clearance. To carry out the different operations of the business, the companies
are required to obtain licenses from the respective regulatory authorities. One
of the biggest challenges of the time is the management of the cross-border
transaction by keeping many things into consideration. The operation of the tax
laws over the revenue influx in Pakistan is also required to be relived and
specifically designed to provide the maximum leverage to the citizens to give
them confidence and also to attract the people to take initiative in global
e-commerce. The Federal Board of Revenue by the virtue of the Income Tax Ordinance, 2001 imposes many
taxes on the income as per the slab rates determined in the various sections
have also been minimized and made related to the zero tax regime. The tax on
services of the companies or entities is also catered by provincial statutes
i.e. rates of sale tax (VAT) on services in Punjab, Sindh, Khyber Pakhtunkhwa, and Baluchistan are 16%, 13%, 5%, and 15%
respectively. The procedures for filing sales tax returns are also cumbersome
and complicated; however, this was also very important to let it not be the
case with the online business having transactions’ data recorded in digital
format. The import of the products from the third party is also a dumbbell some
exercise as the Customs Act, 1969
and in case of 3PL this will be the
costs incurred on the process is no different to arm and leg. In the parlance
of e-commerce, logistics includes but is not limited to the whole process of
shipping orders to the relevant customers or transporting inventory to a
merchant. In the whole world, the process of logistics intimates the customer
and the merchant the track of goods in transit facility and up to the destiny.
The current situation of custom duties and rates also needs considerations to
be minimized to make the whole process cost-effective and efficient for the
purpose to enable newcomers into the field of e-commerce.
In
Pakistan, the absence of a codified law of data protection also creates hurdles
for e-commerce aspirants to fulfill their purpose. Pakistani laws related to
data protection are present in different splinters. For example section 41 of the Prevention of Electronic Crimes
Act, 2016 prohibits confidential information to be handed over to any other
entity. Similarly, provisions of section
115D of the Customs Act 1969, Electronic
Transaction Act 2002, and PTA’s Anti-Spam Regulations also exist to ensure personal data
protection. Moreover, Personal Data
Protection Bill 2021 also invited consultations from the major stakeholders
to give their input in the formulation of the single flawless data protection
legislation in Pakistan. It is expected that the law should be in the
guidelines issued under the GDPR of
the UK. Pakistan at the present lacks legislation to safeguard data
localization. Only in the banking sector, due to strict privacy provisions
under SBP’s various regulations, consumers’ data cannot be transferred
subjected to the existing laws in Pakistan specifically for that purpose.
Ensuring
the consumers have protected under the law the need of
extending the ambit of the Consumer Protection Acts of all provinces. The
activation of the Consumer Protection Council is also a need of hours. The
adaption of the e-commerce model of merchandise is subjected to the consumer’s
acceptance and satisfaction. The eradication of the issues and quick redressal of the grievance is very important to ensure the
efficiency and effectiveness of e-commerce and also is part and parcel of its
success in Pakistan.
In
conventional shopping, the market accepts the consideration for the sale of
goods and services in form of the hard cash/ money. It is subjected to the
nature of currency of the country where the shopping is actually being
proceeded. When it comes to the mode of e-commerce, the exchange of money in
the electronic medium becomes an issue. Customers are reluctant to spend money
due to the apprehension of any fraud or financial scam. Cross-border payment
usually appeared to be a big cut on the pocket without any surety to get the
seller chased in case of faulty inventory. Many times very attractive and unique
articles are unable to be purchased as the mode of payment or the digital
payment is neither recognized by the seller nor by the State Bank. Pakistani
laws such as 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 bodies for the
foreign or cross-border transaction of the funds are needed to be devised in a
broad and effective manner to enable the digital payment transaction with
vendors/ Companies across Pakistan. International Payment Gateways like VISA
and MasterCard are already recognized in Pakistan and working under the
government rules and regulations to existing in Pakistan that facilitate the
merchants for e-Commerce transactions, on local and as well as on cross-border
level. Moreover, cross-border payments Gateways or any other system for
catering to the influx of the payments is to be established for the e-commerce
trade in Pakistan. For which the mode of Cash on Delivery shall be equally
discouraged by giving subsidies on online transactions by using the different
payment gateways and by minimizing the tax-related issues over those on a very
urgent basis. Code of conduct for the operation of the e-commerce companies and
entities is also a way to ensure clean and just competition. The code of
conduct should include but not be limited to the disclosure requirements,
Consumer Protection, Compliance with applicable laws, and many other relevant
aspects for a fair market. The Intellectual property i.e. patent, trademark,
and copyrights requires consideration and attention to be made smooth,
expedited, and user-friendly so the companies can avail the registration in a
time-saving manner, for which the amendments in Trademark Ordinance, 2001, Copyright Ordinance 1962, and Patent
Ordinance, 2000.
The
upshot of the above, entering into the tech-era of e-commerce, the adaption
application and execution of new policies, and rephrasing the laws could be an
omen for the economy of Pakistan. The potential source of handsome income is
only possible if the important legislations and enactments enable the
operations of the different companies and entities to grow and evolve in
Pakistan
[1]. The writer holds an LLB degree from
University of the Punjab and is an Advocate. He currently serves as a General
Counsel at Core Vision International Private Limited (Assets Cart), Lahore he
is also serving at F.I.E Legal’s as senior partner.
He also served as Legal Officer at Digital Rights Foundation. He also former Associate at Surridge
& Beecheno Lahore. He practices law in
e-commerce, criminal, consumer-protection, Medical Negligence, tax and
corporate sectors.
He can be reached at
sardarfarrukh1995@gmail.com