Vehicle ownership in the federal capital is set to become more costly after the government approved a significant increase in token taxes for various categories of vehicles. The decision was endorsed by the National Assembly Standing Committee on Finance, despite concerns raised by lawmakers who argued that the move would place additional financial pressure on middle-income citizens.
According to officials, token tax rates in Islamabad had not been revised for the past seven years, while provincial governments had already updated their taxation structures during the same period. Authorities maintained that the federal capital’s rates needed to be adjusted to align with those implemented elsewhere in the country.
Under the revised system, owners of vehicles with engine capacities up to 1000cc manufactured before 2010 will now pay an annual token tax of Rs20,000. Previously, these vehicles were subject to a one-time fixed tax of Rs10,000. The new arrangement effectively doubles the cost for many owners of older cars.
Changes have also been introduced for vehicles between 1000cc and 1300cc. The tax calculation method has been modified from 0.3 percent of the invoice value to 0.25 percent. While the percentage appears lower, many vehicle owners are expected to face higher yearly payments under the new formula. Older vehicles in this category may pay around Rs2,500 annually, while newer models manufactured after 2010 could be charged approximately Rs6,200.
For example, a vehicle valued at Rs2 million will now attract a token tax of around Rs6,200, compared with the previous charge of only Rs1,500.
Government officials told the committee that the revised taxation structure is aimed at increasing revenue collections. Islamabad generated approximately Rs3.9 billion in vehicle token tax revenue during the current fiscal year, with nearly one-fifth of payments made through digital platforms. Following the implementation of the new rates, annual collections are projected to rise to Rs5.2 billion, an increase of roughly Rs1.3 billion.
The proposal, however, faced criticism from several committee members. Lawmakers questioned the need for higher taxes on vehicle owners who already contribute through fuel levies, registration fees, and other taxes paid at the time of purchase. Some members argued that the decision would disproportionately affect the middle class, while others suggested expanding a lifetime token tax system to all vehicles instead of requiring annual payments.
Critics also challenged the government’s argument that additional funds are necessary for road maintenance, saying existing revenue should already be sufficient to support infrastructure development and upkeep in Islamabad.
Also Read: Punjab Proposes Sharp Increase in Vehicle Token Tax
