By Our Correspondent
LAHORE – In a significant development which is said to be aimed at increasing transparency, tax compliance, and anti-evasion enforcement, the federal government has proposed key amendments in Section 37 of the Sales Tax Act, 1990, as part of the Finance Bill 2025.
These changes are expected to have far-reaching implications for industrialists, manufacturers, and traders across Pakistan, especially those engaged in manufacturing and large-scale retailing.
The amended Section 37 now allows broader monitoring capabilities to the Federal Board of Revenue (FBR), with the inclusion of “production monitoring” and “video analytics” in the official tax machinery’s toolkit.
This move is designed to strengthen oversight mechanisms and digitize enforcement procedures, potentially leading to better tax collection and discouraging under-reporting of production and sales.
Key amendments in section 37 as per the Finance Bill 2025 included Clause (i) of the amendment now includes the words “production monitoring, video analytics,” after the existing term “bar codes” in sub-section (2). This implies that the FBR can now lawfully deploy tools such as surveillance cameras, real-time digital counters, and data-driven video tracking systems to monitor production activities within industrial units.
Clause (ii) introduces the term “monitoring equipment” in sub-section (3) after the word “bar codes”. This paves the way for using various technological devices such as IoT-enabled sensors, automated measurement instruments, and embedded software tools to assess real-time manufacturing output and sales.
Clause (iii) substitutes sub-section (4) with a new provision that gives overriding effect to Section 83C of the Customs Act, 1969, stating:
“Notwithstanding anything contained in this Act or any other law for the time being in force, the provisions of section 83C of the Customs Act, 1969 (IV of 1969) shall mutatis mutandis apply.”
This means FBR can now use customs-style enforcement actions, such as confiscation, inspection, or sealing of premises in case of non-compliance or concealment of taxable activity.
Clause (iv) omits sub-section (5) entirely, which previously contained certain procedural safeguards. The omission likely signals a stricter, less discretionary compliance environment.
Traders and industrialists have expressed mixed reactions. While large industrial concerns see this as a necessary step to create a level playing field and eliminate unregistered competitors, small and medium enterprises (SMEs) are worried about the cost of compliance, privacy, and potential misuse by field staff.
“This is a double-edged sword,” said a senior official of the Lahore Chamber of Commerce and Industry. “On one hand, it enhances transparency, but on the other, it could lead to over-regulation if not implemented with fairness and proper oversight.”
By aligning enforcement with Section 83C of the Customs Act, the FBR can now act more aggressively against entities suspected of evading taxes through under-reporting production or sales. The customs provision allows authorities to seize goods, suspend business activities, and penalize non-compliant entities based on surveillance evidence.
Experts believe this will help curb rampant tax evasion in sectors such as steel, sugar, beverages, and textiles—industries often accused of hiding actual production volumes.
Legal experts and tax consultants suggest that businesses must prepare for a future of continuous surveillance and digital audits. Several industrial associations are reportedly considering legal consultations to challenge the more invasive elements of the law, particularly if privacy violations or arbitrary use of video analytics become common.
However, tax reform advocates argue that such measures are long overdue. “Pakistan has a chronically low tax-to-GDP ratio, and industries that evade taxes hurt the economy and honest taxpayers alike,” an economist said.
With Pakistan under strict fiscal discipline due to its agreements with international lenders, the FBR is under pressure to modernize and digitalize revenue collection. These changes in Section 37 are part of a broader strategy that includes electronic invoicing, track-and-trace systems, and automated refund mechanisms.
The success of these reforms will depend on how transparently and equitably they are implemented. If misused, they could create friction with the business community; if done right, they could mark a turning point in Pakistan’s journey towards a documented economy.
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