The federal government is once again moving toward imposing an Islamabad ride-hailing sales tax as part of the upcoming Fiscal Year 2025–26 federal budget, signaling a major shift in how digital transport services are taxed within the Islamabad Capital Territory (ICT). If approved, a 4% sales tax will be levied on ride-hailing platforms operating in the federal area, bringing an end to the long-standing tax exemption enjoyed by these services in Islamabad.
At present, companies such as InDrive, Careem, Bykea, Jugnoo, and Yango operate in ICT without being subject to any local sales tax, despite providing thousands of daily trips across the capital. This gap has long been viewed by policymakers as an anomaly, especially since provincial governments already tax similar services.

Why the Federal Government Is Reviving the Proposal

According to informed sources, the Federal Board of Revenue (FBR) had earlier proposed the same Islamabad ride-hailing sales tax during the current fiscal year. However, the measure was removed at the final stage of the finance bill following resistance from stakeholders and concerns over inflationary pressure. With revenue challenges persisting and IMF-backed reforms pushing for tax base expansion, the proposal has resurfaced with renewed urgency.
The tax would be implemented under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, a legal framework that already covers a wide range of sectors including hotels, marriage halls, telecom-related services, and information technology providers. Adding ride-hailing services is seen as a logical extension of this ordinance.

Provinces Already Tax Ride-Hailing Services

Punjab, Sindh, and Khyber Pakhtunkhwa currently impose a 5% sales tax on ride-hailing and app-based transport services through their respective provincial revenue authorities. From the government’s perspective, introducing an Islamabad ride-hailing sales tax would harmonize tax treatment nationwide and eliminate disparities between federal and provincial jurisdictions.
Officials argue that Islamabad’s exemption has encouraged regulatory arbitrage, where platforms structure operations to minimize tax exposure, resulting in lost revenue for the federal exchequer.

Related: Pakistan Targets Rs1.7 Trillion Tax Gap with New Reforms

InDrive’s Market Dominance Raises Stakes

Among all platforms operating in Pakistan, InDrive reportedly commands nearly 60% of the domestic ride-hailing market share. This makes it the most significant stakeholder in any new Islamabad ride-hailing sales tax regime. Given its volume of daily rides and aggressive pricing model, even a modest tax could have noticeable implications for fare structures, driver earnings, and platform commissions within the capital.
Industry insiders suggest that platforms may pass at least part of the tax burden onto consumers, potentially raising ride costs in Islamabad at a time when fuel prices and inflation remain key public concerns.

Possible Spillover Into Digital and E-Commerce Taxes

Beyond ride-hailing, the negotiations continuev is also reviewing broader changes to the withholding tax framework for digital and e-commerce platforms. A higher withholding tax rate on online marketplaces, delivery apps, and digital intermediaries is reportedly under consideration for FY26, reflecting the government’s push to capture revenue from Pakistan’s rapidly expanding digital economy.
This signals that the Islamabad ride-hailing sales tax may be part of a wider policy recalibration rather than an isolated measure.

Balancing Revenue Generation and Public Impact

If implemented, the new tax could generate additional revenue for the federal government while aligning ICT with provincial tax practices. However, critics warn that higher ride costs could reduce affordability for daily commuters, students, and gig workers who rely heavily on app-based transport.
As budget negotiations continue, ride-hailing companies, drivers, and consumers will be closely watching whether the proposed Islamabad ride-hailing sales tax makes it into the final Finance Bill—or faces another last-minute reversal.