The Federal Board of Revenue (FBR) has enforced a General Sales Tax (GST) ranging from 5 to 15 percent on a broad spectrum of services in the Islamabad Capital Territory (ICT), effective from July 1, 2025. The move is part of the government’s ongoing efforts to expand the tax base and enhance revenue collection from the services sector.
According to the new tax regime, most services will now be subject to a 15 percent GST. This includes services provided by hotels, motels, guest houses, farmhouses, marriage halls, lawns, and clubs. Advertisement services on television and radio are also covered under the 15 percent bracket, except for campaigns sponsored by the government or those deemed to be in the public interest.
Restaurants in the capital will be taxed under a dual-rate mechanism. A reduced rate of 5 percent will apply if customers pay digitally through debit or credit cards or QR codes. However, this lower rate will not allow for any input tax adjustment or refund. Payments made in cash will be taxed at the full 15 percent rate.
The FBR has also imposed a 15 percent sales tax on services provided by customs agents, stevedores, ship chandlers, courier companies, and road-based cargo operators. Construction services fall under the same 15 percent tax rate, although certain exemptions will apply. These include small-scale residential and commercial projects, government-commissioned works, and some foreign-funded development projects.
Property developers and promoters are now subject to a fixed tax structure in the capital. Land development will be taxed at Rs. 100 per square yard, while construction will be taxed at Rs. 50 per square foot, excluding the cost of land.
Personal care services such as beauty parlours, massage centres, and slimming clinics are also included under the new tax regime. These services will face a 15 percent tax rate, but businesses operating without air-conditioning or generating annual revenue under Rs. 3.6 million will be eligible for a reduced 5 percent tax, again without input tax credit.
A wide range of professional services are now subject to the 15 percent sales tax as well. These include management consultancy, information technology (IT) and IT-enabled services, engineering and scientific consultancy, freight forwarding, packers and movers, tour operators, travel agents (excluding Hajj and Umrah), private security agencies, and advertising agents.
