FBR Cracks Down on Textile Spinning Units

The Federal Board of Revenue (FBR) has intensified enforcement measures against textile spinning units that have failed or refused to install mandatory video analytics systems, commonly referred to as the “digital eye,” within their production facilities. The system is intended to electronically monitor the movement and consumption of cotton bales to curb undocumented transactions.

Out of 421 registered spinning units across Pakistan, approximately 300 are currently operational and fall within the immediate scope of implementation. These units are required to deploy integrated video monitoring mechanisms to ensure traceability of cotton bale movement and prevent evasion of sales tax liabilities.

According to reports, the FBR is prepared to initiate stringent enforcement actions against non-compliant entities. Proposed measures include import embargoes, sealing of business premises, suspension of sales tax registration, blacklisting, and even temporary suspension of production activities. Field formations of the FBR have been formally directed to ensure strict compliance and to proceed with coercive recovery and regulatory actions where necessary.

The requirement to implement video analytics systems was originally introduced with a compliance deadline of 1 November 2025. This deadline was subsequently extended to 31 December 2025; however, the extended timeline has now lapsed. The FBR has indicated that implementation will proceed without further deferment, notwithstanding industry resistance.

To mitigate financial concerns raised by the sector, the FBR has committed to allowing a tax credit in respect of expenditures incurred for installation of the video monitoring infrastructure. Additionally, a joint oversight committee has been constituted to supervise and facilitate implementation across the spinning segment.

The primary objective of the initiative is to document and capture the movement of “Gol Maal,” a colloquial term referring to cotton bales consumed without payment of applicable sales tax. Industry data suggests that textile units consume approximately 13 million cotton bales annually, of which nearly 9 million are reflected within the tax net. The remaining 4 to 5 million bales are reportedly either locally consumed without proper tax documentation or imported under arrangements that escape full tax capture.

The policy has faced resistance from the All Pakistan Textile Mills Association (APTMA), which opposed the installation of video analytics systems at the spinning stage and initiated legal proceedings challenging the measure. However, the Lahore High Court declined to grant interim relief in the form of a stay order, thereby allowing the FBR to continue with implementation and enforcement actions.