ISLAMABAD: The Federal Board of Revenue (FBR) has implemented revised sales tax rates on a wide range of services in the Islamabad Capital Territory (ICT). The new tax structure came into effect on July 1, 2025.
Under the updated policy, most services will be taxed at 15 percent, while a lower rate of 5 percent will apply in specific cases where digital payments are used.
Key sectors affected:
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Hotels, motels, guest houses, farmhouses, marriage halls, clubs, and caterers will now be taxed at 15 percent.
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Restaurants, cafes, food outlets, and similar businesses will be taxed 5 percent if customers pay via debit/credit card, mobile wallet, or QR code. However, if payment is made in cash, a 15 percent tax will apply.
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Electric power transmission services provided within Islamabad are now subject to 15 percent sales tax.
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Television and radio advertisements will also be taxed at 15 percent, except for certain government awareness campaigns.
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IT and IT-enabled services fall under the 15 percent tax category.
These include services such as software development, website design, system integration, hosting, call centres, medical transcription, HR and accounting services, cloud computing, data storage, and insurance claim processing. -
Freight forwarding, courier services, security agencies, technical consultancy, and management services will also be taxed at the same 15 percent rate.
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Construction services are covered under the new tax rules. However, projects valued below Rs50 million, government-funded development projects, and some international contracts will be exempted.
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Property developers and builders will now be taxed based on the size of the land and buildings. Tax will be calculated per square yard for land development and per square foot for construction.
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Beauty salons, parlours, and personal care clinics will generally face a 15 percent tax, but small outlets without air conditioning may qualify for the lower 5 percent rate, depending on certain conditions.
The revised rates are part of the government’s plan to expand the tax base and promote digital payments by offering incentives on non-cash transactions.
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