Punjab raises vehicle token tax, revises sales tax rates in major reform

LAHORE: The Punjab government has announced a wide-ranging tax reform package, including a major increase in vehicle token tax after 20 years, along with revisions in sales tax rates and enforcement measures across multiple sectors, ARY News reported.

According to official details, the token tax on commercial and large vehicles above 1,000cc has been increased, marking the first major revision in two decades. The move is part of broader efforts to update the province’s taxation structure in line with current economic conditions.

Under the new measures, sales tax on various services has been increased from 5 percent to 8 percent, while hotels will now pay 8 percent sales tax on payments made via credit or debit cards. Foreign exchange companies and money changers will also be subject to a newly imposed 3 percent tax on services.

The provincial government has also abolished the “cotton fee” on raw cotton, while offering relief measures for new businesses, which will be exempted from tax regulations for the first six months of operation.

In further reforms, penalties for late property tax payments have been removed in favour of quarterly relief adjustments, while stricter rules have been introduced for showroom owners, who will now face heavy fines for delivering vehicles to customers without proper registration.

Car dealers have also been declared withholding agents for tax collection purposes, while unregistered traders will no longer be eligible for government contracts, licences, or NOCs.

The Punjab Revenue Authority (PRA) has significantly increased penalties for tax violations and failure to issue invoices, with fines for companies now set between Rs500,000 and Rs1 million.

Authorities also confirmed that traders who fail to file tax returns for two consecutive months will be removed from the Active Taxpayers List.

Also Read: Crackdown on unregistered, token tax defaulter vehicles announced