Islamabad is the one place in Pakistan where sales tax on services is not collected by a provincial authority. Services provided in the Islamabad Capital Territory (ICT) are taxed under a federal law, the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, and administered by the Federal Board of Revenue. That arrangement confuses many businesses: some assume there is no tax on services in Islamabad, others register with a provincial authority by mistake. This guide explains which services are taxed in Islamabad, at what rates, and how registration and filing work.
Quick answer: Services listed in the schedule to the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 are subject to sales tax when provided in Islamabad. FBR administers the tax, so service providers register for sales tax on FBR’s IRIS portal and file monthly returns there. Rates are set entry by entry in the schedule: many services are taxed at 15%, while some are taxed at reduced rates under a separate table, and export of services is zero-rated. A business that also provides services in Punjab, Sindh or Khyber Pakhtunkhwa must register with those provinces as well.
Why Islamabad is different
After the 18th Amendment, provinces took over sales tax on services within their borders. Islamabad is not a province, so the federal government continues to tax services there through the ICT Ordinance. In practice this means:
- Services provided in Islamabad are taxed under the ICT Ordinance, administered by FBR.
- Services provided in Punjab are taxed by PRA, in Sindh by SRB, in KP by KPRA and in Balochistan by BRA.
- Goods anywhere in Pakistan remain under the federal Sales Tax Act, 1990.
If your firm works across provinces, see our guides to PRA, SRB and KPRA registration.
Which services are taxable in Islamabad?
Unlike Punjab, which now taxes all services except those specifically exempted, the ICT Ordinance taxes the services listed in its schedule. The list has grown through successive finance acts and now covers a wide range, including:
- Hotels, motels, guest houses, restaurants, caterers and marriage halls.
- Construction services and contractors.
- Advertising, including on billboards, signboards and websites.
- Courier and cargo services, and many transport and logistics services.
- Consultancy, technical and professional services listed in the schedule.
- IT and IT-enabled services, and telecommunication services.
- Beauty parlours, clinics providing cosmetic services, fitness centres and similar personal care services.
- Security, manpower, event management and many other business services.
Because the law works from a list, the first step is always to match your activity to a specific entry in the schedule. The entry decides both whether tax applies and at what rate.
ICT sales tax rates
| Category | How the rate is set |
|---|---|
| Most listed services | Rate stated against each entry, commonly 15% |
| Services in the reduced-rate table | Lower rates, usually with conditions such as no input tax adjustment |
| Export of services | Zero-rated under the Ordinance |
| Exempt or excluded services | As specified in the Ordinance and FBR notifications |
Rates and entries change with each finance act. Check the latest consolidated version of the Ordinance on FBR’s website before quoting a rate in a contract.
Exporting services from Islamabad
Export of services is charged at zero per cent. This matters for Islamabad’s software houses, call centres and freelancers who bill foreign clients. Zero-rating is not the same as being outside the system: you may still need to register, keep proof that the service was exported and that payment came through banking channels, and file returns. Many IT exporters also register with PSEB for other benefits; see our PSEB registration guide.
How to register for ICT sales tax on services
Because FBR administers the tax, registration is done through FBR’s IRIS portal rather than a separate authority.
- Get an NTN for the business if you do not already have one. Our guide to NTN registration in Islamabad covers this step.
- Apply for sales tax registration on IRIS, selecting the service activity and the Islamabad business premises.
- Complete biometric verification and provide the premises, bank account and utility details FBR asks for.
- Respond to any verification or premises inspection.
- Start issuing tax invoices showing your registration number and the tax charged.
The process is broadly the same as ordinary sales tax registration, which we explain in detail in our STRN registration guide.
Returns, payment and withholding
- Monthly returns. File on IRIS for each tax period, including nil returns.
- Payment. Deposit the tax by the due date through the payment system FBR prescribes.
- Withholding. Government departments and other prescribed persons may withhold part of the tax when paying for services. Check that withheld amounts are credited to you.
- Records. Keep contracts, invoices and evidence of where each service was provided, because location decides which authority is owed the tax.
Missing returns can also affect your filer status. See our guide to the Active Taxpayer List.
Common mistakes Islamabad service providers make
- Assuming services in Islamabad are untaxed because there is no provincial authority.
- Registering with PRA for work done in Islamabad, or charging ICT tax on work done in Rawalpindi.
- Applying the standard rate without checking whether the service sits in the reduced-rate table, or the other way round.
- Treating zero-rated exports as needing no records.
- Not registering branches or new service lines on IRIS.
Frequently asked questions
Is there sales tax on services in Islamabad?
Yes. Services listed in the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 are taxable when provided in Islamabad, and FBR administers the tax.
What is the sales tax rate on services in Islamabad?
Rates are set against each service in the Ordinance. Many services are taxed at 15%, some at reduced rates, and export of services is zero-rated.
Where do I register for ICT sales tax?
Register for sales tax on FBR’s IRIS portal. There is no separate provincial authority for services in Islamabad.
Do IT companies in Islamabad pay sales tax on services?
IT services provided locally in Islamabad are taxable at the rate in the Ordinance, while export of IT services is zero-rated, subject to records and conditions.
My office is in Islamabad but the work is in Rawalpindi. Which tax applies?
Generally the tax follows where the service is provided, so work performed in Punjab falls under PRA. Contracts spanning both need careful review.
How CEC can help
Connect Engineers & Consultants works out which authority each of your contracts falls under, registers you with FBR and the provinces, and sets up monthly filing. See our FBR tax compliance services.
Not sure whether your Islamabad service is taxable? Send us a description and we will match it to the schedule.
The ICT Ordinance and its schedules are amended by each finance act and by FBR notifications. Always check the latest version on FBR’s website. This guide is general information, not tax advice.
