The federal cabinet has approved higher token tax rates for Islamabad registered vehicles.
Acting on a Ministry of Interior proposal during a recent meeting in Islamabad the federal cabinet uses the rational of strengthen revenue collection and modernisation for recent increase in token tax rates.
What changes in Vehicle Token Tax?
Officials said token taxes have been charged under the West Pakistan Motor Vehicles Taxation Act, 1958, which has seen minimal updates up until now.
Previously, token rates were revised in 2019, limiting annual growth in receipts.
For FY2024–25, the Excise and Taxation Department reported Rs 4.29 billion in revenue and set a Rs 4.5 billion target under the new Finance Bill.
Furthermore, the Cabinet was told the framework lagged provincial systems and hampered efficient administration.
To address the issue, the Islamabad Capital Territory Administration has drafted the West Pakistan Motor Vehicles Taxation (Amendment) Act, 2025.
The bill proposes revised token tax rates across private, commercial, and public service vehicle categories.
In addition, it also recommends allowing ICTA to retain the rights of collecting above the Rs 4.5 billion target.
The retained surplus would be channelled into ICT development initiatives, subject to applicable approvals and oversight from the concerned authorities.
Why the Vehicle Token Tax revision matters
The government proposed aim is to align Islamabad’s taxation with provincial practices and simplify enforcement.
Officials expect clearer categories, updated schedules, and better compliance through an up-to-date legal basis.
For drivers, any increase will affect annual ownership vehicle costs.
Authorities say improved administration should translate into more predictable processes and quicker service delivery at excise counters.
Policy planners argue that letting ICTA keep surplus revenue can accelerate local works such as transport facilitation and public services, without waiting for supplementary allocations.
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