The Federal Board of Revenue (FBR) has made it mandatory for manufacturers of over 30 locally produced products to install video surveillance equipment at the manufacturing premises for electronic monitoring of production facilities on a real-time basis to check tax evasion in these sectors.
The FBR will issue a separate notification to specify the deadline for vendors to install the video surveillance equipment at the manufacturing premises of these sectors.
The FBR has issued an SRO. 889(I)2010 to amend the Sales Tax Rules, 2006 here on Monday.
The manufacturers of the following products are required to install “intelligent video analytics” at their premises for electronic monitoring of production on a real-time basis:
- Fruit juices and vegetable juices
- Ice cream
- Aerated waters or beverages
- Syrups and squashes
- Toilet soap
- Shaving cream
- Perfumery and cosmetics
- Powder drinks
- Milky drinks
- Toilet paper and tissue paper
- Spices sold in retail packing bearing brand names and trade marks
- Shoe polish and shoe cream
- Cement sold in retail packing
- Mineral/bottled water
- Household electrical goods
- Including air conditioners
- Deep freezers
- Recorders and players
- Electric bulbs
- Electric fans
- Electric irons
- Washing machines and telephone sets
- Household gas appliances
- Including cooking range
- Geysers and gas heaters
- Foam or spring mattresses and other foam products for household use
- Cellulose lacquers and polishes sold in retail packing
- Lubricating oils
- Brake fluids
- Transmission fluid, and other vehicular fluids sold in retail packing;
- Storage batteries excluding those sold to automotive manufacturers or assemblers
- Tyres and tubes excluding those sold to automotive manufacturers or assemblers;
- Auto rickshaws
- Biscuits in retail packing with brand name
- Auto-parts, in retail packing, excluding those sold to automotive manufacturers or assemblers.
It is to be noted that almost all manufactures of items sold in retail packing or sold in the basis of printed retail price are covered under the new procedure of the FBR.
The FBR’s new rules stated that the provisions of these new rules shall apply to video surveillance for electronic monitoring of production on a real-time basis.
The production of specified goods, manufactured in Pakistan, shall be monitored through intelligent video surveillance, and video analytics by the installation of equipment including video cameras, sensors, etc., at production lines, as are approved by the Board for real-time collection of data that shows production through object detection and object counting; the transmission of data to the central control room at FBR on real-time basis, storage and archiving of data; detection of unexpected stops; quantitative analyses of productions and data analytics for required legal actions.
The FBR has further stated that no person engaged in the manufacturing of specified goods shall remove the production from its business premises unless it has undergone the process of intelligent video surveillance.
The revenue board said that the manufacturers of specified goods shall buy video monitoring equipment only from the authorized vendor.
No manufacturer of the specified goods shall buy video monitoring equipment which is not authorized or approved by the Board.
The FBR will setup the approval committee which shall function in accordance with the provisions of these rules.
The Project Director shall be the convener of the approval committee and its headquarters shall be located at FBR House, Islamabad. The Board shall provide secretarial and other allied support required for functioning of the approval committee. The approval committee shall devise procedures for its functioning, which shall be in accordance with these rules.
The vendor shall be required to have and demonstrate the ability to provide equipment with high security and efficiency for electronic monitoring of production and video analytics on real-time basis.
The equipment offered by the vendor must have the following features including
- The equipment shall have high definition video camera and sensor that can record and count the production.
- The “equipment shall have ability to weigh ‘the product contained in bags.
- It shall have ability to integrate with the software recommended by FBR which will be used for transmission of data to central control room.
- The equipment will conduct video analytics and communicate results thereof to central control room(CCR).
- The equipment will report any unauthorized stoppages of production through generation of appropriate alarm.
- The system should have sixty days remotely retrievable local, on-site, and at place, specified by the Board, off-site, data storage at each site.
- The CCR should have a central data storage capacity capable of storing and retrieving data on long term basis up to five years and the equipment must be stable, fault-tolerant, secure and accessible only by username and password as authorized by the Board.
IT team shall develop software to run and operate the system, as per requirements of the Board
The FBR stated that the IT team shall develop software to run and operate the system, as per requirements of the Board.
The equipment provided by the vendor after integration with FBR software shall be able to perform the following functions including
- Monitoring capability on real-time basis at factory premises or production lines
- The ability to configure the production unit remotely
- The system must be capable of sending alert messages and trigger alarms, visible and audible, in case of occurrence of abnormal events such as unauthorized stoppages of production, tempering with equipment and camera etc.
The system reporting should be capable to filter and process the production data for statistical and analytical purposes and the system should ensure secure data storage and archiving of data for five years from its generation or recording.
The team shall submit a complete list of operations, software and maintenance required to operate the equipment.
The authorization granted under these rules shall be non-transferable and shall not be allowed to be used by any sub-contractor. The vendor shall also assist the Pakistan Revenue Automation (Pvt.) Ltd. (PRAL) to install its software on the equipment and run the system during the trial period of authorization.
The IT team of FBR shall ensure that each factory premises is connected to the system with adequate IT infrastructure required for real-time electronic monitoring of production and generation of periodic reports. The vendor shall arrange testing of monitoring equipment at each production site.
The manufacturer of specified goods shall make all production facilities available for installation of the system and allow access to the vendor and FBR for routine operations, inspection and maintenance; not supply any goods without routing them through the intelligent video analytics, be responsible to pay the fee as agreed with the vendor; be responsible for smooth functioning, protection and security of the intelligent video analytics.
The manufacturer of specified goods shall report to the Board and concerned Commissioner Inland Revenue, within 24 hours of any operational failure, damage, disruption or tampering of the intelligent video analytics.
Provided that any damage to the system found to be due to carelessness, negligence or deliberate action of the manufacturer will be repaired at the expense of the manufacturer, without prejudice to any legal action that may be taken for recovery of evaded tax and imposition of penalty; allow unhindered access to the FBR and any officer, authorized in this behalf; give a notice to the Board, at least thirty days in advance, from the date of start of production of new brands of goods, expansion, modification or any other changes in the production line; make available the damaged equipment, camera, etc., for inspection by the officer authorized by Commissioner Inland Revenue.
The FBR added that the vendor shall be liable to punitive action under the Sales Tax Act, 1990 and rules made thereunder, in cases of its willful collusion with the manufacturer for violation or contravention of any of such provision.
The vendor shall also be liable to deposit duty and taxes along with surcharges and penalties under the Sales Tax Act, 1990 and the relevant rules, where it is established through proceedings under the Act, after providing an opportunity of being heard, that the vendor has colluded with manufacturer resulting in evasion of duty and taxes.
The FBR shall arrange to carry out an audit of the system every year. The report shall be used for system-related improvements and corrective and remedial actions, where warranted, FBR added.