Sales Tax evasion uncovered in tile sector; FBR moves to install monitoring cameras

ISLAMABAD: Pakistan’s tile sector has been implicated in annual Sales Tax evasion of nearly Rs 30 billion, prompting the Federal Board of Revenue (FBR) to approve strict monitoring measures across 17 industrial sectors, ARY News reported.

During a briefing to the Senate Finance Committee, chaired by Senator Saleem Mandviwalla, FBR Chairman Rashid Langrial revealed that the authority will introduce camera-based production monitoring to curb widespread Sales Tax manipulation. He said the system has already led to major gains, with the sugar sector expected to contribute an additional Rs 76 billion this year and the cement sector Rs 102 billion.

Langrial warned that tile manufacturing companies refusing to install monitoring cameras would face industry shutdown, as the FBR no longer trusts production data submitted by manufacturers. According to officials, tile companies frequently underreport production, leading to large gaps in Sales Tax collection.

To streamline the process, the FBR has reduced the requirement for tile-sector monitoring cameras from 16 to four strategically placed cameras, covering the kiln, packaging areas, and all entry and exit points. The chairman said this setup is necessary to ensure accurate production tracking and prevent Tax evasion.

He added that the FBR expects a revenue shortfall this month but has not yet decided on additional tax measures for January. The monitoring initiative began with sugar mills, following directives from the prime minister to ensure oversight across all mills, including those owned by cabinet members.

Langrial confirmed that the FBR will eventually install monitoring cameras in every industrial sector to ensure transparency and protect the national exchequer from further Sales Tax losses.

Sales Tax Collections Jump 32pc in FY 2024-25

Earlier, Pakistan’s Ministry of Finance reported a significant rise in sales tax collection for the fiscal year 2024-25, with 15 major sectors contributing the bulk of revenue.

According to the ministry, local ST collections reached PKR 1,619.5 billion, a 32.4 percent increase compared to PKR 1,222.9 billion collected in FY 2023-24. The 15 top-performing sectors accounted for 57 percent of total local sales tax revenue, led by electricity, petroleum products, sugar, cement, and cotton yarn. Other contributing sectors include natural gas, cigarettes, motor cars, tea, beverages, food products, biscuits, refrigerators, and motorcycles.

The electricity sector remained the largest contributor to local sales tax, generating PKR 460.55 billion, up from PKR 363.46 billion in the previous fiscal year, representing 22.8 percent of total collections. While most sectors saw positive growth, petroleum products and cigarettes experienced a decline in local sales tax collection.

The automotive sector recorded remarkable growth, with sales tax on vehicles rising 159 percent, driven by higher production and sales. Vehicle sales increased from 79,594 units in FY 2023-24 to 111,402 units in FY 2024-25, while motorcycle sales jumped from 1,150,112 units to 1,518,752 units, resulting in a 136 percent increase in sales tax revenue from motorcycles.

Sales tax on imports, a key component of federal revenue, also saw robust growth, totaling PKR 2,281.9 billion, up 22.4 percent from PKR 1,863.9 billion in the previous fiscal year. Petroleum products remained the largest contributor to import sales tax, with collections rising 13.8 percent, from PKR 309.6 billion to PKR 315 billion.

The Ministry of Finance said the growth in sales tax collections across most major sectors reflects strong economic activity and improved compliance, highlighting the resilience of Pakistan’s revenue system.