The Federal Board of Revenue (FBR) is expanding tax oversight by integrating manufacturers, wholesalers and distributors of fast-moving consumer goods (FMCG) into the Digital Invoicing System (DIS). This initiative aims to strengthen sales tax control and address the significant revenue leakage in this sector.
Under the directions of Prime Minister Shehbaz Sharif, the FBR’s transformation plan seeks to connect nearly 10,000 FMCG entities with DIS across the country. The system will focus on manufacturers and wholesalers, going beyond the retail stage to target the most important points of tax evasion in the value chain.
The FBR has identified key sectors of fast-moving consumer goods, including wheat flour mills, beverage companies, food manufacturers and bakeries. The aim is to ensure accurate tracking of sales and reduce billions of rupees annually lost due to non-reporting or evasion.
Currently, tier-one retailers are connected to the point-of-sale (PoS) system, but its effectiveness in plugging leaks has been limited. In response, FBR has reformed the Proof of Stake (PoS) mechanism for hotels and restaurants in Islamabad. A pilot project now incentivizes consumers to report fraudulent receipts by offering rewards to complainants, thus improving compliance.
The DIS initiative aims to digitize invoicing processes at key points in the supply chain to improve transparency and compliance. By linking 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 is consistent with the government’s broader strategy to digitalize the economy and modernize tax administration. FBR is actively collaborating with industry stakeholders to ensure smooth implementation, including consultations on technical and logistical challenges.
Preparations for the 2025-2026 budget
In addition to DIS, the FBR invited relevant stakeholders to submit proposals for the upcoming 2025-2026 budget. The main objectives of this consultation process include:
- Expanding the tax base: Increase participation in revenue generation efforts.
- Expansion of the goods and services tax system: Bringing the entire value chain of all businesses within the GST framework.
- Promoting progressive taxation: Targeting the highest income groups with tailored tax measures.
- Simplifying tax laws: Remove redundancy to improve ease of doing business.
- Eliminate tax distortions: Addressing procedural deficiencies and deviations to enhance impartiality in taxes.