The Federal Board of Revenue (FBR) has implemented a General Sales Tax (GST) ranging from 5 to 15 percent on a broad spectrum of services within the Islamabad Capital Territory, effective from July 1, 2025.
Under the new tax structure, the majority of services will now be subject to a 15 percent GST, including those provided by hotels, motels, guest houses, farmhouses, marriage halls, lawns, and clubs. Advertisement services on television and radio are also included in this category, with exceptions made for government-sponsored or public interest campaigns.
Restaurants will face a two-tier tax system:
- A 5 percent GST for payments made via digital means—such as debit or credit cards and QR codes—with no input tax adjustment or refund,
- A 15 percent GST for cash payments.
Additional services taxed at 15 percent include those provided by customs agents, stevedores, ship chandlers, courier companies, and road cargo operators. Construction services are also taxed at this rate, except in cases of smaller residential or commercial projects, government works, and foreign-funded development projects, which remain exempt.
Property developers and promoters will now pay a fixed charge:
- Rs. 100 per square yard for land development,
- Rs. 50 per square foot for construction,
These charges apply only to the construction value and exclude the cost of land.
Personal care services such as beauty parlours, massage centres, and slimming clinics are subject to a 15 percent GST. However, businesses that operate without air-conditioning or have an annual turnover below Rs. 3.6 million will be taxed at a reduced rate of 5 percent, with no input tax credit.
Other services also subject to 15 percent GST include management consultancy, IT and IT-enabled services, engineering and scientific consultancy, freight forwarding, packers and movers, tour operators, travel agents (excluding Hajj and Umrah operators), security services, and advertising agents.
This tax regime aims to broaden the tax base and enhance revenue collection from the services sector in the federal capital.
