ISLAMABAD: The Federal Board of Revenue (FBR) has decided to digitally monitor the value chain of tobacco to cigarette manufacturing at the factory level to plug the widespread incidence of tax evasion in the sector.

To plug the incidence of tax evasion, the FBR has issued instructions to install CCTV cameras at the designated points of cigarette factories as well as green leaf thrashing stations to completely monitor the production.

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In this regard, the FBR has issued instructions to all tobacco manufacturing units to install IP-based CCTV cameras at designated points inside their factories to ensure real-time monitoring of cigarette production.

The directive was issued through a Sales Tax General Order No. 7 of 2025 released on Wednesday.

To monitor real-time tobacco production the FBR has installed CCTV cameras at all nine green leaf threshing stations. Of these, two are operated by multinational companies, while the remaining seven are managed locally. The monitoring at the Thresher unit level entails utilising a larger machine to enhance the quality of tobacco processing. The installation of cameras at these units allows for straightforward tracking.

The FBR believed that this enforcement measure would help to determine the actual potential of cigarettes, aiming to enhance revenue generation from the tobacco industry.

According to the directive, all tobacco manufacturers — both large and small — will be prohibited from removing finished goods from factory premises unless the production process is recorded and monitored through IP-based CCTV systems.

The FBR has directed that all tobacco manufacturing units install IP-CCTV cameras in specified places of manufacturing facilities. “No person engaged in the manufacturing of Tobacco Products will remove any production from their business premises unless it has undergone the process of production monitoring through IP-CCTV cameras”, it further said.

The government is collecting sales tax at the standard rate of 18 per cent on cigarettes in accordance with the Sales Tax Act of 1990. The collection of sales tax on domestic cigarette sales ranks among the top 20 revenue generators. At the same rate, the government is collecting Federal Excise Duty (FED) on cigarettes as stipulated by the Federal Excise Act, 2005, with a substantial increase observed in the past few years.

The field formations have been directed to ensure the installation of cameras at the premises of the factory with immediate effect. The tax generated from the tobacco sector is less than its potential. The FBR bel­ie­ves, based on private sector analysis, that the real toba­cco industry tax collection should be roughly Rs600bn.

Published in Dawn, November 13th, 2025