Islamabad, June 17, 2025 – The Federal Board of Revenue (FBR) is set to issue a formal negative list identifying exempt services within the Islamabad Capital Territory for the upcoming fiscal year 2025-26.
As part of the proposals outlined in the Finance Bill 2025, the FBR has been granted powers to specify which services will be treated as exempt under certain conditions, restrictions, and limitations. This legislative move is designed to streamline service taxation and align Islamabad’s tax framework with provincial practices, especially regarding services that will remain untaxed.
A key feature of the new proposal is the insertion of a proviso under sub-section (1) of Section 3 of the Sales Tax Act. According to this amendment, the FBR may require any service provider listed in Table 1 or Table 2 of the relevant Schedule to integrate its business operations with the FBR’s Computerized System. This step aims to enable real-time reporting and monitoring of taxable and exempt services, improving transparency and compliance.
This integration mechanism mirrors similar systems already in place under provincial sales tax laws and reflects FBR’s commitment to ensuring uniform service taxation across the country. The specific implementation procedure and the effective date will be communicated by the FBR through a general order.
Additionally, the Finance Bill 2025 continues to honor Pakistan’s international commitments by exempting certain services under the Sixth Schedule of the Sales Tax Act, 1990. These include services provided to the German Development Agency (GIZ) as per serial no. 147, and services acquired by agencies of the United Nations, diplomats, diplomatic missions, and other privileged entities listed at serial no. 163 of the same schedule.
With the formal introduction of a negative list, the FBR aims to clarify which services are exempt and reduce ambiguity in service taxation within Islamabad. This move is expected to enhance regulatory oversight while ensuring that only designated services remain exempt from tax, providing greater clarity for taxpayers and service providers alike.