IHC seeks govt reply over withholding tax hike on goods transportation

• Petitioners term concessional treatment of oil tanker contractors ‘discriminatory’
• Argue distinction based merely on nature of goods being transported

ISLAMABAD: The Islamabad High Court (IHC) has sought responses from the federal government, the Federal Board of Revenue (FBR) and other respondents on a petition challenging the increase in withholding tax (WHT) on goods transportation from 6pc to 7pc through the Finance Act, 2026.

A division bench comprising Justices Khadim Hussain Soomro and Muhammad Asif also issued a notice to the attorney general for Pakistan (AGP) after the petitioners challenged the vires of relevant provisions of the Income Tax Ordinance, 2001.

The court fixed the matter for further hearing on Sept 17.

The petition was filed by Advocate Kashif Ali Malik on behalf of I.S. Enterprises and Shaheen Freight Services.

During the hearing, the counsel argued that the enhanced WHT was discriminatory, particularly in view of the concessional tax regime available to oil tanker contractors under the Second Schedule of the Income Tax Ordinance.

He contended that the same prime movers and transport infrastructure were being used for carrying petroleum products and other goods of similar capacity.

However, an oil tanker carrying petroleum products was subjected to withholding tax at 2pc, while the same vehicle, when used to transport other goods, attracted 7pc WHT.

According to the counsel, the distinction was based merely on the nature of goods being transported and had no rational basis. He argued that the differential treatment violated Articles 4 and 25 of the Constitution, which guaranteed protection of law and equality before law.

‘No justification’

The counsel further questioned the basis for increasing the withholding tax from 6pc to 7pc, submitting that no publicly available economic impact assessment or empirical study had been conducted to justify the additional tax burden on goods transporters.

He argued that oil tanker operators had historically been given concessional tax treatment because any strike by them could disrupt fuel supplies across the country.

On the other hand, goods transport operators, despite providing the same basic transportation service and not resorting to such measures, were subjected to a substantially higher withholding tax.

The petitioners maintained that the impugned amendment created an unreasonable and discriminatory classification betwe­­en transport operators performing essentially the same service.

After hearing the preliminary arguments, the IHC bench issued notices to the federal government, the FBR and other respondents.

As the petition also challenged the constitutional validity of statutory provisions, the court directed issuance of a notice to the AGP. The respondents have been asked to respond to the petition before the matter is taken up on Sept 17.

Through the Finance Act, 2026, the federal government revised the withholding tax regime on services, with rates increased from 6pc to 7pc for services such as courier, logistics, hotel, transport, air cargo, car rental, human resource outsourcing and oil drilling.

Published in Dawn, August 9th, 2026