The Federal Board of Revenue (FBR) has decided to establish a Central Control Room at the FBR Headquarters to monitor the actual production and sales at all sugar mills to check tax evasion after installation of high-tech video cameras on the production lines of units through Video Analytics Surveillance system (VAS).
FBR officials told Propakistani that the exercise of deputing tax officers within the manufacturing premises of sugar mills for monitoring under section 40B of the Sales Tax Act 1990 has failed in the past. The FBR has repeatedly exercised the powers under section 40B of the Sales Tax Act 1990, but the actual production and sales of sugar mills cannot be ascertained. Now, VAS is the only solution to check the production and sales of all major commodities, including sugar.
The FBR will monitor the production of specified goods, manufactured in Pakistan, through intelligent video surveillance and video analytics by the installation of equipment including video cameras, sensors, etc., at production lines that shows production through object detection and object counting, transmits data to the central control room at the FBR on a real-time basis, stores and archives the data, detect unexpected stops, provides quantitative analyses of productions, and data analytics for required legal actions.
The manufacturer of specified goods shall make all production facilities available for installation of the system and allow access to the vendor and the 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.
In a meeting of the Economic Coordination Committee (ECC) of the Cabinet held on February 8, 2021, the FBR had presented a summary regarding the procurement of a Video Analytics Surveillance system (VAS) for proper monitoring of the production and sale of sugar in compliance with the directive of the Prime Minister. The ECC approved an allocation of Rs. 350 million as a Technical Supplementary Grant for the installation of the most optimal VAS solution at the premises of the sugar mills during the current crushing season as requested by the FBR.
According to the summary submitted to the ECC by the FBR, exclusively available with Propakistani, to properly monitor the production and sale of sugar and the attendant sales tax and income tax thereon, the FBR issued SRO 889(1)/2020 warranting all sugar mills to install Video Analytical Surveillance system (VAS) expecting that the process would be completed before the official onset of the crushing season on November 10, 2020.
The FBR ran a rigorous process of procurement as enshrined under the VAS Rules, 2020, and pre-qualified/approved seven vendors for supply and installation of the system on sugar factories. The cost of each VAS System installation was expected to be around Rs.3 million.
The summary by FBR revealed that the VAS system, however, has so far been installed only by eight sugar mills and those too are sub-standard solutions. Ostensibly, the cost, which under the prevailing rules is to be borne by the sugar mills, has been the key factor towards the unsuccessful implementation of the VAS system. Sugar mill-owners, in an apparent effort to cut cost, went around getting demonstrations and quotations from all seven vendors consuming unending time in the process; those that went ahead with installation eventually opted for the cheapest and sub-optimal solutions.
A relatively small contract size/volume (80 mills only) to be distributed over seven vendors also did not prove an incentive for them to aggressively invest in procurement of the systems and install in a timely fashion. The last deadline, i.e., January 31, 2021, has already expired, and it seems unlikely that the system would be installed satisfactorily across the board by all the mills soon enough. The situation warrants a change in approach.
It is believed that picking up of VAS system expenses by the Government, and awarding the contract to only one vendor to complete installation at the mill’s premises, and establishment of a Central Control Room at FBR in the shortest possible time, as desired by the Prime Minister, could achieve the desired results.
This would require an urgent allocation of Rs. 350 million as ‘technical Supplement Grant and exemption from the application of Public Procurement Rules and Regulations for the installation of the most optimal VAS solution selected in the least possible time, FBR summary added.