K-P becomes first province to introduce digital payments law

Initiative taken to encourage small, informal businesses to enter formal economy without fear of immediate taxation

PESHAWER:

In a significant move toward establishing a modern, transparent, and technology-driven economic system, Khyber-Pakhtunkhwa Chief Minister Sohail Afridi has approved the Khyber-Pakhtunkhwa Digital Payments Act 2025.

The draft bill, a first-of-its-kind initiative in Pakistan, will be placed before the provincial cabinet for formal endorsement, positioning K-P as the country’s pioneer in developing a comprehensive legal framework for a digital economy.

According to the chief minister, the new law mandates that all payment systems across government departments, businesses, and the service sector transition to QR code–based digital payments. The measure aims to streamline financial transactions, enhance transparency, and ensure greater convenience for the public.

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In a major relief for the undocumented sector, CM Afridi announced that for a two-year period from the commencement of the Act, any digital payments received through QR codes by previously undocumented business entities registered under the new law will not be used as grounds for imposing new direct sales tax liabilities.

This provision is designed to encourage small and informal businesses to enter the formal economy without fear of immediate taxation. However, refusal to accept digital payments or charging extra fees for such transactions will be treated as a violation of the new legislation.

Highlighting the bill’s broader objectives, the chief minister said the move is expected to accelerate financial inclusion, reduce dependence on cash-based transactions, and support the transition toward a modernised provincial economy. He added that strict safeguards have been instituted to protect both consumer and business data, ensuring that the digital payment ecosystem complies with international benchmarks for security and privacy.

To facilitate smooth implementation, the provincial government has decided to introduce public Wi-Fi and other digital services in markets and commercial zones. Financial and digital literacy will also be integrated into the academic curriculum, while district-level structures will be strengthened to oversee training programmes and ensure effective onboarding of the business community.

CM Afridi emphasised that the initiative places K-P on a path to becoming Pakistan’s first cashless model economy, offering a potential roadmap for federal and provincial governments nationwide. He stressed that a modern digital payments system is a necessity of the current era and will ease financial transactions for citizens and businesses alike.

The chief minister asserted that the widespread adoption of digital payments will curb opportunities for corruption, improve revenue stability, bolster data-driven policymaking, and enhance the performance of government institutions. Most importantly, he said, it will play a crucial role in reinforcing public trust in governance and state institutions, marking a major milestone in K-P’s digital transformation journey.