FBR Announced to Apply New GST Structure on Islamabad-Based Non-Optional Services Islamabad: In a major step in fiscal policy, the Federal Board of Revenue (FBR) has imposed the new General Sales Tax (GST) framework on various service providers in Islamabad from July 1st, 2025. The new GST rates are likely to hit the business community, event organisers, and the general public as services have mostly been included in the 15% GST slab.
So, What Are the Services Currently Taxable at 15% GST?
The following services in the ICT are brought under 15pc GST:
- Hotels, motels, guest houses, and farm houses
- Wedding halls, lawns, and clubs
- Advertising services (with exceptions for television and radio)
- Customs agents, stevedores, and ship chandlers
- Courier services and transporting cargo by road
- Construction services (some exceptions apply)
- Consulting, IT, and ITES services
- Engineering and scientific consultancy
- Logistics, Packers & Movers, Tour & Travel.
- Travel agents, excluding Hajj and Umrah
- Security agencies, advertising agents
- Personal care establishments, including beauty parlours, massage centres, and slimming salons (with exceptions)
Special GST Rates and Exemptions Applicable on Restaurants and Personal Care
Restaurants face a two-tier tax structure under the new rules:
- 5% GST on digital payment made by customers (either through QR code /debit/credit cards and the like), No Input Tax adjustment or refunds.
- Cash transactions will have 15% GST added.
Personal care services can avail a 5% GST rate for businesses without air conditioning or businesses with an annual turnover below Rs. 3.6 million; however, input tax credit is not allowed. Otherwise, 15% GST applies.
Property Developers, Contractors, and Construction Service Providers under the GST
- Builders and contractors are held to a fixed charge: Rs. 100 per square yard for land development and Rs. 50 per square foot for construction (excluding cost of land).
- There is a 15% GST on contractors unless the value of the annual chain contract is less than Rs. 50 million or the work relates to book printing.
- Tax: Construction services are taxed at 15 percent with exemptions for smaller projects, government contracts, and eligible foreign-funded developments.
Policy Justification and Effects on Businesses
The purpose of the FBR’s move is to expand the tax net and enhance the federal revenue with a specific focus on high-value services sectors. Fifteen per cent GST on most services will drive up the cost of weddings, events, dining out, and personal care — bad news for businesses and consumers alike. Digital payments are incentivised through a lower tax rate for restaurants, with a few exceptions for small businesses to reduce the load.
What Do Businesses and Consumers Need to Know?
- Examine the new tax model and its impact on service pricing.
- Businesses can also entice frugal shoppers with digital payments.
- For more information or exemptions on a sector-wise basis, stay tuned to FBR notifications.
Conclusion
FBR’s new Goods and Services Tax rates in Islamabad are a trend to formalize and increase revenue from the services collection. Although it could result in more expensive services for some, partial exemptions as well as digital payment incentives help businesses and consumers.
