NA finance panel clears higher token tax on Islamabad vehicles, targets Rs5.2bn revenue

The National Assembly Standing Committee on Finance on Saturday approved a revised and higher token tax structure for vehicles registered in the Islamabad Capital Territory (ICT), aiming to raise annual revenue from about Rs3.9 billion to nearly Rs5.2 billion.

The approval came during deliberations on budget-linked taxation measures, where officials informed the committee that the existing token tax regime in Islamabad had remained unchanged since 2019 and was significantly lower than comparable jurisdictions.

Under the revised framework, token tax will now be calculated as a percentage of a vehicle’s invoice value. Vehicles with engine capacities between 1,001cc and 2,000cc will be taxed at 0.25 per cent of invoice value, while those above 2,001cc will be subject to a 0.35 per cent rate.

Officials presented projections showing that a vehicle currently valued at around Rs5.2 million in the 1,001–1,300cc category would attract an annual token tax of approximately Rs13,000. In comparison, earlier valuations of around Rs1 million for similar vehicles would have resulted in a tax of roughly Rs2,500, compared with the current Rs1,500.

For mid-range categories, the revised annual liability would stand at around Rs16,250 for 1,301–1,500cc vehicles and approximately Rs20,000 for those in the 1,501–2,000cc bracket.

Higher-capacity vehicles will face steeper charges under the new structure, with 2,001–2,500cc vehicles paying about Rs35,000 annually, while vehicles above 2,500cc will be liable for roughly Rs70,000 per year.

Officials told the committee that Punjab has already approved similar percentage-based rates for FY2026-27, including 0.3 per cent for vehicles up to 2,000cc and 0.4 per cent for higher engine capacities. In contrast, Balochistan, Khyber Pakhtunkhwa and Sindh continue to apply fixed annual token tax rates based on engine categories.

During the meeting, several lawmakers questioned the sharp increase and sought justification for the projected rise in revenue collection, arguing that affordability concerns should be considered alongside revenue targets. However, officials defended the proposal, stating that rising vehicle prices and outdated tax structures necessitated the revision.

Despite reservations expressed by members, the committee approved the proposal, paving the way for implementation of the new ICT token tax regime from the upcoming fiscal year.