IHC seeks govt reply over withholding tax hike on goods transportation

The Islamabad High Court (IHC) is examining a petition that challenges the recent increase in withholding tax (WHT) on goods transportation services. The federal government, through the Finance Act of 2026, raised the WHT rate from 6% to 7%. Petitioners argue this hike is discriminatory and lacks a rational basis, particularly when contrasted with the more favorable tax treatment afforded to oil tanker contractors.

Represented by Advocate Kashif Ali Malik, petitioners I.S. Enterprises and Shaheen Freight Services contend that the enhanced WHT is unfair. They highlight that oil tanker contractors, who transport petroleum products, are subject to a lower WHT rate of 2% under a concessional tax regime. The petitioners assert that the same vehicles and transportation infrastructure are used for both petroleum products and other goods, making the differential tax rate based solely on the nature of the goods illogical and a violation of constitutional rights to equality and protection under the law.

Furthermore, the petitioners questioned the justification for the tax increase itself, stating that no public economic impact assessment or empirical study was readily available to support the additional burden on goods transporters. They pointed out that while oil tanker operators historically received preferential tax treatment due to the critical nature of fuel supply, general goods transporters, who provide a similar essential service without resorting to disruptive measures, face a substantially higher tax rate.

The IHC division bench, comprising Justices Khadim Hussain Soomro and Muhammad Asif, has issued notices to the federal government, the Federal Board of Revenue (FBR), and the Attorney General for Pakistan, given the challenge to the constitutional validity of certain provisions. The respondents are required to submit their responses before the court reconvenes for further hearing on September 17.