New vehicles token tax comes into effect from today

A new token tax system for vehicles has officially come into effect across Pakistan from today, July 1, after the government’s approval of changes under the Finance Bill 2026. Under the revised taxation system, the previous flat token tax structure based solely on engine capacity has been replaced with a percentage-based system linked to a vehicle’s invoice value. According to the new rates, vehicles with engine capacities of up to 1000cc will continue to pay a fixed annual token tax of Rs20,000. Owners of vehicles with engine capacities ranging from 1,001cc to 2,000cc will now pay token tax equal to 0.25 per cent of the vehicle’s invoice value. For vehicles between 2001cc and 2500cc, the annual token tax has been set at 0.35 per cent of the invoice value. The same 0.35 per cent rate will also apply to all vehicles with engine capacities above 2,500cc. The revised token tax regime is expected to have a greater financial impact on owners of high-value vehicles, as the tax payable will now increase in line with a vehicle’s invoice price rather than being determined solely by engine size.

On the other hand, the Punjab Excise, Taxation and Narcotics Control Department has decided to launch strict enforcement actions across the province to improve the recovery of token tax and other dues.

Director General of Excise, Umar Sher Chatha, has directed defaulters to immediately clear their outstanding token tax payments, warning that a 100% penalty will be imposed on those who fail to comply.

He said a special enforcement campaign will be launched in the final month of the current financial year against token tax defaulters. Under this campaign, vehicles with unpaid taxes will be impounded, while action will also be taken against unregistered vehicles across Punjab.

According to the DG Excise, the department has collected a record Rs 70 billion during the first 11 months of the current financial year. This amount is Rs 15 billion higher than the total collections of the previous financial year.

He further said that out of the total revenue collected, Rs40 billion came from motor vehicle tax, while Rs25 billion was generated through property tax.

Umar Sher Chatha also instructed strict action against property tax defaulters. He ordered that the commercial properties of defaulters should be sealed without delay.

Also read: How much token tax will you pay?