Key Takeaways
- The Federal Board of Revenue (FBR) has extended electronic production monitoring to the leather and paper sectors.
- Four private vendors will install and operate camera-based monitoring systems in these industries.
- The move aims to strengthen sales tax monitoring and curb tax evasion.
The Federal Board of Revenue (FBR) has expanded its electronic production monitoring system to include the leather and paper sectors, authorising four private vendors to install and operate camera-based monitoring systems. This initiative is part of the FBR’s broader efforts to enhance sales tax monitoring and reduce tax evasion.
Under the new arrangement, IP cameras and Network Video Recorders (NVRs) will be installed at production lines to continuously capture real-time production activity. These recordings will be retained for at least two months, providing the FBR with direct oversight of factory operations.
The FBR issued SRO 1751 of 2026 on Wednesday to notify that production by registered manufacturers of leather and paper would be electronically monitored under Chapter XIV BA of the Sales Tax Rules 2006. This move brings additional manufacturing sectors into a system that allows the tax authority to directly observe production activity and maintain records of factory operations.
The FBR has also introduced an online facility for steel melters and re-rollers to declare electricity consumption to calculate their sales tax liability, addressing issues where distribution companies fail to report or submit returns late.
The automated system typically obtains electricity consumption data from distribution companies filing Annex C of their returns. However, taxpayers have faced difficulties when distribution companies do not declare electricity supplied or file returns late, preventing the required data from being automatically reflected in Annex K.
To address these challenges, the FBR has introduced an online facility for steel melters, re-rollers, and composite units to declare electricity consumption manually. This ensures that sales tax liability can still be calculated under the Thirteenth Schedule of the Sales Tax Act 1990.
The four vendors authorised to supply, install, operate, and maintain production-monitoring equipment across the leather and paper sectors are Obsidian Technologies, Tollink Pakistan, ISSM Labelling Solutions, and Authentik. Each vendor will be responsible for procuring, installing, operating, maintaining, and repairing the equipment.
All footage and recordings will remain the property of the FBR and will be treated as confidential, with sharing prohibited except as directed by the Board. The FBR’s move is expected to significantly enhance its ability to monitor and regulate production activities in these key industries, ensuring compliance with tax laws.
The FBR’s expansion of electronic production monitoring is a significant step towards improving tax collection and reducing instances of tax evasion in Pakistan’s manufacturing sector.
