ISLAMABAD: Sales tax collection through the Point-of-Sale (PoS) system surged by 40 per cent in FY25, reaching Rs414 billion compared to Rs295bn in the previous year, reflecting a significant improvement in the documentation of retail sales.

The Federal Board of Revenue (FBR) stated that the PoS system is helping to bring luxury retail items and affluent consumers into the tax net by targeting Tier-1 retailers, including large malls and major retail chains.

According to the FBR, real tax collection grew by 42pc in FY25 — the highest in a decade. It clarified that while nominal growth can be inflation-driven, real growth indicates stronger purchasing power, enabling the government to fund public welfare initiatives.

The total incremental collection of Rs2.435tr during FY25 included Rs766bn from autonomous growth, Rs805bn from policy measures (new taxes), and Rs865bn from enforcement actions. In comparison, enforcement measures had yielded just Rs105bn in FY24.

Despite economic challenges and disinflation in the latter half of the fiscal year, FBR attributed the exceptional rise in collections to a broad set of enforcement and digital initiatives.

These included targeted recovery from high-net-worth individuals using banking data, identification of undeclared bank accounts, and income under-reporting across field offices. The FBR also rolled out AI and machine learning tools for risk-based audit selection and improved advance tax enforcement.

Automated analysis units were established to detect underpayment, while measures were taken to curb sales tax fraud through revised return formats and regulatory improvements. A dedicated task force is also developing further digital, security, and policy initiatives to tackle tax fraud.

Digital monitoring across the value chain was enhanced through real-time stock-taking and enforcement under Section 40B in major sales tax cases.

A production monitoring solution — already showing gains in output and tax collection — was piloted in select sectors, with plans to expand it to over eight sectors.

The FBR also strengthened oversight of withholding tax through the SWAPS system, launched in collaboration with three banks, and stepped up the digital integration of PoS systems in retail and wholesale markets across three major cities.

Further gains were achieved through customs reforms, including faceless assessments and digital enforcement stations, as well as focused recovery drives targeting manufacturers operating outside the sales tax regime to broaden the tax base.

Published in Dawn, July 2nd, 2025