The Space Between a Prompt and a Handmade Stitch
September 13, 2026
Pakistan’s tax authority has ordered action against factories without electronic production monitoring, threatening seizures, blocked refunds, penalties and possible closures.
The Federal Board of Revenue (FBR) has escalated its electronic monitoring drive, ordering field formations to stop the removal of goods and finished products from factories without approved production monitoring systems.
Under amendments to the Sales Tax Act and Rules, excisable goods produced or moved without electronic monitoring may be seized, along with the vehicles used for their transportation. The directive marks a sharper shift from digital reporting to physical enforcement at factory gates.
The monitoring systems will use video analytics, object detection and automated counting to record production in real time. Data will be transmitted to an FBR central control unit, while the system will archive footage, identify unexpected production stoppages and support quantitative analysis for potential legal action.
Manufacturers of specified goods will not be permitted to remove products from their premises unless production has passed through the prescribed electronic monitoring process. Vendors will charge manufacturers for equipment, installation, operation and maintenance, with maximum fees to be determined and publicly notified by an approval committee.
The FBR has already begun implementing the system in Pakistan’s tile manufacturing sector. Sales Tax General Order 02/2026 IR (Operations) required tile units to install video analytics systems by April 30, 2026, after the Lahore High Court vacated a stay previously granted to the sector.
ISSM Labelling Solutions (Private) Limited has been authorised as the designated vendor for installation and integration in the tile industry. The FBR has warned that non compliance could lead to penalties, legal proceedings, sealing of premises and other measures under the Sales Tax Act.
The spinning industry is also facing immediate pressure. The FBR has issued notices to 421 textile spinning units for failing to install digital production monitoring systems, according to sources cited by Business Recorder.
Only 12 of the notified units have engaged vendors, while six have completed installation and six remain under implementation. The tax authority has directed field formations to pursue full enforcement against units that resist the system.
Potential measures include blocking refunds, restricting imports through the green channel, suspending sales tax registration, blacklisting and refusing clearance of goods from production premises. Noncompliant units could also face penalties, sealing or suspension proceedings.
The FBR has additionally expanded invoice requirements to cover exempt supplies and advance receipts, each requiring a verifiable, unique FBR invoice number. The move is intended to improve transparency across both taxable and exempt transactions as the authority seeks stronger documentation and tighter control over industrial output.
