ISLAMABAD: The Federal Board of Revenue has blocked more than Rs6 billion in refunds claimed by industrial units that failed to comply with mandatory digital monitoring requirements, marking the first major enforcement action under the new system introduced in July 2026.
The action targets businesses that did not install or integrate production monitoring and other digital systems at their premises. Further penalties could include suspension of sales tax registration, restrictions on imports, sealing of business sites and seizure of finished goods, according to sources familiar with the matter.
The Finance Act 2026 gives the FBR wider powers to link taxpayer facilities and refund processing with compliance involving production monitoring, digital invoicing, point-of-sale systems and other electronic integration measures.
Refunds Withheld in First Phase
In the first phase, the tax authority has stopped refunds worth more than Rs6 billion belonging to units that resisted production surveillance and other prescribed digital measures.
The move is intended to push manufacturers towards real-time reporting and reduce the risk of underreported production, sales tax evasion and undocumented movement of goods.
Sources said businesses that continue refusing to install production monitoring systems by July 31 could face a broader range of enforcement measures.
These may include fines, blacklisting, suspension of sales tax registration, denial of green-channel facilities at the import stage, restrictions on imports and a halt to the clearance of goods from production sites.
Video Monitoring to Expand Across Industries
The FBR plans to enforce video monitoring systems and video analytics in selected industries as part of its wider tax digitalisation programme.
Production monitoring measures have already been introduced in the tobacco, cement, sugar, fertiliser and tiles sectors, with systems installed at most covered facilities.
Installation is also under way in the iron and steel, packaged milk, beverages and textile industries, according to reports. The FBR has separately confirmed the rollout of video analytics-based production monitoring in the tiles sector.
Under the new legal framework, taxable goods may be prevented from leaving manufacturing sites unless they are covered by tax stamps, tracking labels, production monitoring, video analytics or another mechanism prescribed by the tax authority.
FBR Combines Refund Payments With Enforcement
The tax authority has adopted what officials describe as an incentive-and-enforcement approach to digital compliance.
Around Rs43 billion in refunds were released in June 2026, while total refunds paid during FY2025-26 reached nearly Rs600 billion. At the same time, units that failed to meet digital requirements are now facing delayed refunds and possible legal action.
The latest crackdown signals that the FBR intends to use its expanded legal powers to make electronic production monitoring a central part of tax compliance across major manufacturing sectors.
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