KARACHI – Ride-hailing services like Careem, InDrive and Yango are key parts of urban transportation, especially in cities like Islamabad offering flexible travel for thousands of commuters, but the fares of these rides are expected to move up after tweaks in the upcoming budget.
Pakistani government is considering the introduction of 4% sales tax on cab services operating in capital city, as part of its fiscal measures for the upcoming 2025–26 budget.
As of now, companies like InDrive and Yango are not subject to sales tax within the Islamabad Capital Territory but this could soon change as the Federal Board of Revenue of Pakistan finalizes proposals aimed at broadening the tax base and boosting revenue collection. Officials said while a similar tax was proposed in last year’s budget, but was excluded.
Under new proposal, residents are bearing 5 percent sales tax on ride-hailing services in Punjab, Sindh, and other regions. The proposed sales tax on ride-hailing services is expected to widespread effect on passengers, companies, and drivers. For passengers, the most direct impact will be an increase in fares, as companies are likely to pass the tax onto users.
It could eventually make rides less affordable, particularly for daily commuters, potentially pushing some toward public transport or reducing ride frequency. Ride-hailing companies such as InDrive, Careem, and Bykea may face increased costs. If they choose not to transfer the full burden of the tax to users to remain competitive, their profit margins could shrink.
The company can also cut driver incentives or promotional activities to offset impact. Drivers, on the other hand, might see fewer ride requests if demand dips due to higher fares. Their earnings could also be squeezed further if companies revise commission structures or bonuses.
The new taxes will help bring federal tax policy in line with provincial practices but will put pressure on both company profits and driver incomes while providing a new revenue source for the government and expanding the tax base.
The above-mentioned changes are under proposal and relevant authorities are yet to share any final decision in the pre-budget discussion.
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