ISLAMABAD — October 9, 2026
The Federal Board of Revenue (FBR) has expanded electronic production monitoring to the leather, paper and paperboard industries, strengthening its efforts to curb tax evasion and improve sales tax collection through greater digital oversight of manufacturing activity.
Under the new arrangement, authorised private vendors will install and operate Internet Protocol (IP) cameras and Network Video Recorders (NVRs) at production lines of registered manufacturers. The cameras will capture production activities in real time, while recordings will be retained for at least two months.
According to a report published by *Dawn* on October 8, the FBR has issued SRO 1751 of 2026 to bring the relevant manufacturing sectors under electronic monitoring provisions of the Sales Tax Rules, 2006. The Board has also authorised four private vendors to supply, install, operate and maintain monitoring equipment across designated industries.
The initiative aims to enable tax authorities to obtain a clearer picture of actual factory output rather than relying exclusively on production figures reported by manufacturers in their tax returns.
Closing the gap between production and declared sales
Electronic production monitoring is intended to help the FBR identify discrepancies between manufacturing activity and declared production, sales and tax liabilities. Such discrepancies may lead to further verification, audits or enforcement action where warranted.
For example, if a manufacturer produces more goods than it reports for tax purposes, monitoring records may provide additional evidence for the tax authorities to investigate possible underreporting.
The system does not automatically establish tax evasion. Any suspected irregularity would need to be assessed against relevant records, applicable tax rules and the manufacturer’s explanation.
The latest expansion forms part of a wider effort to improve compliance in sectors where weaknesses in tax reporting may result in revenue losses.
Four vendors authorised for monitoring
The FBR has authorised Obsidian Technologies, Tollink Pakistan, ISSM Labelling Solutions and Authentik for production-monitoring activities in specified industries.
The designated sectors include packaged tea, household electronics, paper and paperboard, edible oil and ghee, and leather, alongside previously authorised arrangements in other industries.
The authorisation specifies that the monitoring equipment covered by the new arrangement is limited to IP cameras and NVRs. The recordings will remain the property of the FBR and must be treated as confidential, with disclosure restricted in accordance with the Board’s directions.
The vendors are responsible for the installation, operation, maintenance and repair of the authorised equipment, subject to the applicable technical requirements and regulatory conditions.
Connection with the IMF programme
The expansion is consistent with Pakistan’s broader tax-revenue reforms under its programme with the International Monetary Fund (IMF).
In its April 2026 country report, the IMF identified production monitoring, digital invoicing and stronger taxpayer audits as key components of the FBR’s transformation plan. The report said monitoring production quantities was expected to improve the accuracy of sales tax declarations and strengthen revenue mobilisation.
The IMF report also highlighted the importance of expanding monitoring in sectors with significant tax gaps. These measures are intended to improve compliance among existing taxpayers and reduce opportunities for underreporting.
However, electronic production monitoring should not be confused with the FBR’s Track and Trace System. The two initiatives serve related but distinct purposes.
Production monitoring uses cameras and recording equipment to observe manufacturing operations. Track and Trace, by contrast, uses identifying marks, tax stamps or related product-tracking mechanisms in applicable sectors to help establish product authenticity and monitor goods through the supply chain.
Both systems support stronger tax enforcement, but the available information does not establish that the new camera-based monitoring equipment is directly integrated with the existing Track and Trace platform.
Implications for manufacturers
The expansion could increase compliance requirements for manufacturers brought within the monitoring framework. Businesses may need to facilitate equipment installation, maintain accurate production and inventory records, and ensure that their sales tax declarations are consistent with their operations.
For the FBR, access to production footage may provide an additional source of information for identifying potential discrepancies and prioritising investigations. The effectiveness of the initiative will ultimately depend on reliable equipment, appropriate data analysis, transparent enforcement and consistent application of tax laws.
The government will also need to ensure that the monitoring framework is implemented fairly and that confidential business information is protected in accordance with the applicable rules.
Revenue mobilisation remains the broader objective
Pakistan has been pursuing a range of revenue-administration reforms to improve tax compliance and reduce persistent collection shortfalls. Digital invoicing, risk-based audits and production monitoring are intended to strengthen the administration of existing taxes while improving the accuracy of reported economic activity.
The expansion into additional manufacturing sectors represents another step in this process. Whether it produces a sustained increase in tax revenue will depend on the quality of implementation, the identification of genuine compliance gaps and the FBR’s ability to convert monitoring data into effective, evidence-based enforcement.
