LAHORE: The Punjab government has proposed an increase in sales tax on restaurant payments made through digital channels under the Punjab Finance Bill 2026, while maintaining a higher tax rate for other payment methods.
According to the proposed legislation, payments made via debit cards, credit cards, mobile wallets, and QR codes will be subject to an 8 percent sales tax, compared to the current rate of 5 percent.
Meanwhile, restaurant transactions made through other payment methods, including cash, will continue to attract a 16 percent sales tax, creating a significant difference between documented digital payments and conventional payment channels.
Digital Payment Tax Rate Increased
If approved, the proposal will raise the tax burden on customers using digital payment methods for dine-in, takeaway, and other restaurant services. However, the 8 percent rate will remain substantially lower than the 16 percent sales tax applicable to non-digital transactions.
The existing tax structure offered a reduced 5 percent sales tax rate on payments processed through banking and digital platforms to encourage electronic transactions and improve tax documentation. The Punjab Finance Bill 2026 seeks to revise this concession by increasing the rate to 8 percent.
Government Aims to Boost Revenue Collection
Officials believe the proposed increase could help generate additional revenue for the provincial government while continuing to incentivize the use of traceable payment methods. By maintaining a lower tax rate for digital transactions compared to cash payments, the government aims to promote greater documentation of restaurant sales and strengthen tax compliance within the hospitality sector.
The proposal is part of broader taxation measures introduced in the Punjab Finance Bill 2026 and will take effect after approval by the provincial assembly.
