ISLAMABAD: The National Assembly Standing Committee on Finance on Saturday approved a substantial increase in token tax on vehicles registered in the Islamabad Capital Territory (ICT), despite concerns from lawmakers over the steep hike and its potential impact on vehicle owners.
The approval came during the committee’s consideration of budget-related taxation measures, where officials informed members that the federal government currently collects around Rs3.9 billion annually through token tax in ICT and expects revenues to rise to approximately Rs5.2 billion after the revised rates come into effect.
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The committee, however, questioned the rationale behind the sharp increase, with several members asking why the government was imposing a significantly higher burden on vehicle owners compared to existing rates.
Officials from the ICT administration defended the proposal, arguing that token tax rates in Islamabad were not increased since 2019 and had remained substantially lower than those prevailing in provinces, particularly Punjab, despite a sharp rise in vehicle prices over the years.
According to the revised structure approved by the committee, token tax for vehicles with engine capacities ranging from 1,001cc to 2,000cc will be charged at 0.25 percent of the vehicle’s invoice value, while vehicles with engine capacities of 2,001cc and above will be taxed at 0.35 percent of invoice value.
Officials presented comparative data showing that a vehicle valued at around Rs1 million in the 2000-2010 period and falling within the 1,001-1,300cc category would have attracted a token tax of roughly Rs2,500 under the proposed formula, which is currently Rs1500.
However, with the average value of a similar vehicle now estimated at Rs5.2 million, the annual token tax would rise to around Rs13,000.
Likewise, token tax on vehicles in the 1,301-1,500cc category would increase to approximately Rs16,250, while vehicles in the 1,501-2,000cc category would pay around Rs20,000 annually.
For higher engine capacities, the tax burden would rise more sharply. Vehicles in the 2,001-2,500cc bracket would face token tax of around Rs35,000, while vehicles above 2,500cc would be liable to pay about Rs70,000 annually under the revised regime.
Officials told the committee that the existing ICT rates were significantly below those charged in other jurisdictions. They pointed out that Punjab has already approved token tax rates equivalent to 0.3 percent of invoice value for vehicles up to 2,000cc and 0.4 percent of invoice value for larger vehicles for fiscal year 2026-27.
The committee was informed that while Balochistan, Khyber Pakhtunkhwa and Sindh continue to levy fixed annual token taxes for various engine categories, the proposed ICT model links tax liability directly to the invoice value of the vehicle, making it more reflective of prevailing market prices.
Several committee members nevertheless expressed reservations over the magnitude of the increase and sought justification for the projected jump in collections from Rs3.9 billion to Rs5.2 billion. They argued that the government should balance revenue generation with affordability, particularly at a time when vehicle prices have already surged significantly.
Despite these concerns, the committee ultimately cleared the proposal, paving the way for implementation of the revised token tax structure in the federal capital from the upcoming fiscal year.
Copyright Business Recorder, 2026
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