By In a major policy shift, the federal government has decided to increase token tax rates for private, public service, and commercial vehicles in Islamabad. The decision was finalized after the Cabinet approved a summary submitted by the Ministry of Interior and Narcotics Control, calling for amendments to the West Pakistan Motor Vehicles Taxation Act, 1958—the decades-old legislation under which token taxes are currently levied.
The Excise and Taxation Department, Islamabad Capital Territory (ICT), which manages vehicle registration, ownership transfers, and collection of taxes and duties, has been facing stagnant revenue growth due to unchanged token tax rates since 2019.
Revenue Collection and New Targets
In the FY 2024-25, the Excise Department collected Rs. 4.29 billion, nearly achieving its target. However, under the 2025 Finance Bill, the department has set a higher collection target of Rs. 4.5 billion. Officials explained that the outdated token tax structure was limiting revenue potential and creating disparity with provincial tax frameworks.
The Cabinet was briefed that without an upward revision, ICT’s vehicle taxation system would continue to lag behind provincial models, resulting in inefficiencies in administration and lower contributions to national revenue.
West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025
To operationalize the new rates, the ICT Administration (ICTA) has introduced a draft law titled the “West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025.”
The bill proposes:
- Revised token tax rates for all vehicle categories (private, public service, and commercial).
- Parity with provincial rates to ensure a standardized taxation system across Pakistan.
- Permission for ICTA to retain any revenue collected beyond the Rs. 4.5 billion target, which will be allocated to development projects within Islamabad.
Why the Token Tax Increase Matters?
The Islamabad token tax increase 2025 marks a crucial step in modernizing the vehicle taxation framework. By aligning ICT rates with provincial benchmarks, the government hopes to:
- Boost revenue collection for the federal exchequer.
- Strengthen ICT’s financial autonomy, allowing reinvestment into local infrastructure.
- Improve tax administration efficiency through standardized policies.
- Support sustainable development initiatives in the capital city.
With the Cabinet’s approval, the implementation of the Amendment Act is expected to begin soon, impacting thousands of vehicle owners across Islamabad.
Disclaimer
The information provided in this article regarding the Islamabad token tax increase 2025 and the West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025 is based on official announcements, government summaries, and credible news sources available at the time of writing. Final implementation, rates, and policies may vary depending on subsequent approvals, amendments, or notifications issued by the relevant authorities.
Vehicle owners and stakeholders are advised to consult the Excise and Taxation Department, Islamabad or the official ICT Administration notifications for the most accurate and up-to-date details before making any financial or compliance decisions.
