The Federal Board of Revenue (FBR) is reportedly planning to broaden the scope of sales tax on services within the territorial jurisdiction of the federal capital as part of the upcoming budget for fiscal year 2025-26.
In addition to expanding the services subject to sales tax, potential changes to the withholding tax regime are also being considered, which may include increased withholding tax rates specifically targeting e-commerce platforms.
Under the existing legal framework of the Islamabad Capital Territory (Tax on Services) the FBR currently levies a 15 percent sales tax on a diverse range of services. These include services provided by hotels, motels, guest houses, farmhouses, marriage halls, lawns, clubs, and caterers, as well as IT services and IT-enabled services, among others.
Ride-Hailing Services Likely to Be Taxed
Sources indicate that a significant addition to the list of taxable services from the next fiscal year could be Ride Hailing Services operating within the federal capital. The FBR is likely to propose introducing a 4 percent tax specifically on CAB aggregators providing these services in the Islamabad Capital Territory.
This move would bring ride-hailing services under the federal tax net in Islamabad. Currently, Provincial Revenue Authorities across the country are already charging a 5 percent sales tax on services provided by Ride Hailing Services within their respective jurisdictions. The proposed federal rate for Islamabad would be slightly lower than the prevailing provincial rate.
The proposed measures are expected to be formally announced as part of the finance bill for the 2025-26 fiscal year, aimed at enhancing the government’s revenue collection efforts through indirect taxation on services and adjustments to the withholding tax structure for the digital economy.
