Federal Cabinet Approves Hike in Vehicle Token Tax

In a significant move to boost revenue, the federal government has decided to increase token tax rates for private, public service, and commercial vehicles in Islamabad.

Sources said that the Cabinet, in its last meeting, approved a summary submitted by the Ministry of Interior and Narcotics Control proposing amendments to the decades-old West Pakistan Motor Vehicles Taxation Act, 1958, under which token taxes are currently levied.

The Excise and Taxation Department, ICT, is responsible for vehicle registration, transfer, and the collection of taxes and duties on behalf of the Federal Government.

The token tax rates had remained unchanged since 2019, limiting the Excise department’s revenue-generating potential.

In FY 2024-25, the department successfully collected Rs. 4.29 billion. However, it has set Rs. 4.5 billion target in the 2025 Finance Bill. The Cabinet was briefed that the outdated rates not only hampered revenue collection but also rendered the tax framework misaligned with provincial counterparts.

The proposed hike is intended to bring parity and improve efficiency in tax administration.

To operationalize this change, the ICT Administration (ICTA) has submitted a draft law titled “West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025.” The bill proposes revised token tax rates across all vehicle categories and seeks approval for ICTA to retain any amount collected over the Rs. 4.5 billion target for use in its own development initiatives.