The Federal Board of Revenue (FBR) is expanding its tax oversight by integrating Fast Moving Consumer Goods (FMCG) manufacturers, wholesalers, and distributors into the Digital Invoicing System (DIS). This initiative aims to strengthen sales tax monitoring and address substantial revenue leakages in the sector.
Under the directives of Prime Minister Shehbaz Sharif, the FBR’s Transformation Plan seeks to connect approximately 10,000 FMCG entities with the DIS across the country. The system will focus on manufacturers and wholesalers, bypassing the retail stage to target the most significant points of tax evasion in the value chain.
The FBR has identified key FMCG segments for the rollout, including wheat flour mills, beverage companies, food manufacturers, and bakeries. The goal is to ensure accurate tracking of sales and reduce the annual billions of rupees lost due to underreporting or evasion.
Currently, tier-1 retailers are linked with the Point of Sale (PoS) system, but its effectiveness in plugging leakages has been limited. In response, the FBR has overhauled the PoS mechanism for hotels and restaurants in Islamabad. A pilot project now incentivizes consumers to report fake receipts by offering prizes to complainants, thereby improving compliance.
The DIS initiative aims to digitize invoicing processes at key points in the supply chain to improve transparency and compliance. By connecting wholesalers and manufacturers, the system will provide real-time data on sales and tax collection, reducing opportunities for evasion.
The FBR also intends to phase out manual processes, making compliance easier for businesses while increasing tax revenues.
The project aligns with the government’s broader strategy to digitize the economy and modernize tax administration. The FBR is actively engaging with industry stakeholders to ensure smooth implementation, including consultations on technical and logistical challenges.
Preparations for Budget 2025-26
In addition to the DIS, the FBR has invited proposals from relevant stakeholders for the upcoming 2025-26 budget. The key objectives of this consultation process include:
- Broadening the tax base: Increasing participation in revenue generation efforts.
- Expanding the GST regime: Bringing the entire value chain of all businesses under the GST framework.
- Promoting progressive taxation: Targeting higher-income classes with tailored tax measures.
- Simplifying tax laws: Removing redundancies to improve ease of doing business.
- Eliminating tax distortions: Addressing procedural inefficiencies and anomalies to enhance neutrality in taxation.
