Cameras on Every Line by the Fifteenth: STGO 27 of 2026, S.R.O. 1751(I)/2026 and What Section 40C of the Sales Tax Act, 1990 Actually Permits the Board to Require

On Wednesday, 7th October 2026, the Federal Board of Revenue issued Sales Tax General Order No. 27 of 2026, which gives every registered manufacturer of packaged tea, household electronics, paper and paperboard, edible oil and ghee, and leather until Thursday, 15th October 2026 to install internet protocol cameras on every production line, with a recorder holding two months of footage, and which says that after that date the goods “shall not be removed from the business premises unless produced under an operational video surveillance system”. The press reported the order the next morning and said two things about it that are not right: that the penalty for missing the date is unspecified, and that the date is the only one that matters. The penalty is specified, in a serial of the Act that Parliament rewrote in June, and the date is in conflict with two other dates the Government itself has set.

What the order requires

The order is made under Section 40C(2) of the Sales Tax Act, 1990, read with rules 150ZQR, 150ZQT, 150ZQU and 150ZQZE of Chapter XIV-BA of the Sales Tax Rules, 2006. Paragraph 1 names the five sectors, leather being defined to include “both tanneries and synthetic leather manufacturers”. Paragraph 2 reaches every registered person manufacturing those goods “whether on their own account or as toll manufacturers”, and requires at each production line internet protocol cameras and a network video recorder conforming to Annex-B and covering the points in Annex-A; the cameras “shall remain fixed and shall not be moved, obstructed or switched off”, and all recordings are to be kept for not less than two months.

Annex-A fixes five minimum points: the entry and exit of the premises, a 360-degree view of each production hall, the start and end of each line, the packaging station of each line, and the dispatch bay, and the Board “may add to, or modify” them for any unit. Annex-B fixes the kit, down to thirty metres of night vision and an hour of battery backup. Equipment of any make will do if it meets the specification, but by paragraph 3 the system may be bought only from the four vendors the Board authorised by a separate certificate the same month, Obsidian Technologies, Tollink Pakistan (Pvt.) Ltd., ISSM Labelling Solutions (Private) Limited and Authentik, each authorisation running three years. Paragraph 4 puts the whole cost on the manufacturer. Paragraph 5 gives the Board on-demand remote access to the live feed and declares that “all footage shall be the property of the Board”. Paragraph 7 restates three duties already in rule 150ZQZE: to provide the premises, the information technology and the internet connection; to report any failure, damage, disruption or tampering “within one hour of its occurrence”; and to give thirty days’ notice of any new product or any change in a line. Paragraph 9 then says that failure to install in time, “or any act to avoid, obstruct or tamper with the monitoring of production, shall render the registered person liable to penal action under the Sales Tax Act, 1990 and the Rules”. No figure appears, which is where the reports stopped reading.

Why only two sectors needed a notification

Section 40C was inserted by the Finance Act, 2013, and sub-section (1) lets the Board specify any registered person or class of goods for monitoring “through electronic or other means as may be prescribed”. Chapter XIV-BA of the Rules, which does the prescribing, was inserted by S.R.O. 889(I)/2020 of 21st September 2020 and rewritten almost rule by rule by S.R.O. 364(I)/2025 of 14th March 2025, which is the text now in field.

Rule 150ZQR applies the chapter to goods in the Third Schedule to the Act and to “any other goods notified by the Board through a specific order”. That explains a feature of 7th October 2026 that the reports did not: the order covers five sectors, but S.R.O. 1751(I)/2026 of the same day, made under Sections 50(1) and 40C, notifies only two, “Leather and Paper and Paperboard”. Tea is serial 14 of the Third Schedule and household electrical goods, “including air conditioners, refrigerators, deep freezers, televisions”, are serial 38, hence those two sectors needed no notification at all; edible oil and ghee were reported notified by S.R.O. 880(I)/2026 on 20th May 2026, alongside packaged milk and steel; and leather and paper, which are in neither place, needed the notification they got. A manufacturer of any Third Schedule good should therefore understand that the only thing standing between it and a camera order is the Board’s choice of a date.

The bar on removal is now in the Act

The question I had meant to ask of this order was whether a general order can forbid the removal of goods from a factory when Section 40C spoke only of monitoring. Until June the bar stood in rule 150ZQT(2) alone, and a rule that creates a prohibition its parent section does not carry is open to attack. Parliament closed that attack in the Finance Act, 2026 (Act XLIII of 2026), assented to on 26th June 2026, which substituted sub-sections (2) and (3) of Section 40C. Sub-section (2) now provides that from such date as the Board prescribes “no taxable goods shall be removed or sold by the manufacturer or any other person unless such goods are affixed with tax stamps, band role stickers or labels are monitored through a Production Monitoring System, video analytics or any other prescribed monitoring mechanism”, and sub-section (3) provides that the “production monitoring equipment etc., shall be acquired by the registered person ... from a licensee appointed by the Board”. The same Act defined “production monitoring system” at Section 2(22)(1A) widely enough to cover any technology the Board prescribes, and added a new sub-section (6) under which goods dealt with “without compliance with the prescribed monitoring system” are liable to seizure and confiscation “along with the conveyance used for the movement, carriage or transportation of such goods”.

Paragraph 6 of the order, which bars removal from 15th October 2026, is therefore a statutory condition applied to a date, and not a rule outrunning its section; the vendor monopoly in paragraph 3 rests on sub-section (3) and rule 150ZQU; and the lorry at the dispatch bay is at risk under sub-section (6) as well as the goods on it. One thing should be said against the drafting. Sub-section (2) has lost the word “or” between the stamps and the monitoring, so that goods must be “affixed with ... labels are monitored”, and while any court will read the sentence as a list of alternatives, it is not the kind of sentence a Finance Bill should let through.

“Penal action” has a number

The order’s silence on the penalty is a cross-reference, not a gap. Section 33 of the Act is a table, and serial 25 of that table was substituted by the Finance Act, 2026. It now reads against any person “who is required to integrate his business for monitoring, tracking, reporting or recording of sales, production and similar business transactions with the Board or its computerized system” and who, being registered, “fails to integrate in the manner as required under law within the stipulated time as notified by the Board”. Such a person “shall be liable to pay a penalty up to one million rupees, if he continues to commit the offence after one month of the imposition of first penalty, he shall be liable to second penalty of up to five million rupees”, and “notwithstanding, his business premises shall be liable to be sealed with or without imposition of penalty by an officer of Inland Revenue”. The column of reference is Section 40C.

Serial 24, inserted by the Tax Laws (Amendment) Act, 2020, answers the second limb of paragraph 9. A person integrated for monitoring who conducts transactions “in a manner so as to avoid monitoring, tracking, reporting or recording” pays five hundred thousand rupees or two hundred per cent of the tax involved, whichever is higher, and is further liable, on conviction by a Special Judge, to simple imprisonment of up to two years, with the premises again liable to sealing. Beneath the Act, rule 150ZQZE(i) and (j) let the Commissioner’s officer seal an inoperative production line with a security seal, not to be broken “except with the permission of the Commissioner Inland Revenue or Board”. A manufacturer reading paragraph 9 should therefore read it as a penalty of up to five million rupees, a sealed gate and, for tampering, a prosecution.

Eight days against ninety

The weakness of the order is its date, and it is the Board’s own rules that expose it. The order is dated 7th October 2026 and requires the system to be installed by 15th October 2026, eight days later. Rule 150ZQZA(4), substituted in March 2025, provides that the vendor “shall specify the expected delivery and installation of production monitoring equipment at production lines, which shall not exceed ninety days from the date of purchase order”. The Board has thus given four vendors ninety days to perform a contract that every manufacturer in five sectors must have performed within eight.

The Government’s own timetable says the same. Dawn reported on 13th October 2026 that the Prime Minister, at a meeting on 12th October 2026, directed that production monitoring reach “all manufacturing sectors by the end of the year”, and the plan put to him had equipment for tea, household electronics, leather, paper and board, and oil and ghee being purchased by 30th October 2026, with all sectors “fully operational by Dec 31, 2026”. The order’s deadline for installation falls a fortnight before the Prime Minister’s date for purchase.

The penalty under serial 25 bites on failure “within the stipulated time as notified by the Board”, and until the Board changes it that time is 15th October 2026; but the penalty is imposed by adjudication after notice, not by the order itself, and an officer deciding whether to penalise a tannery whose purchase order is dated the 14th and whose vendor is within the ninety days the rules allow will be hard put to find a default. The removal bar in paragraph 6 is the sharper problem, since it operates on the date and not on fault: read literally, a tea factory whose cameras are on order cannot lawfully dispatch a carton from Thursday. The Board should align paragraph 2 with its own rule and its own Prime Minister by a further order before the 15th, and if it does not, the focal persons the Chief Commissioners must name under paragraph 8 are the place for every manufacturer to record, in writing and before the date, that the purchase order was placed and the vendor’s delivery date accepted.

The fee that nobody has capped

Rule 150ZQZD(1) lets the vendor charge the manufacturer for purchase, installation, operation and maintenance; sub-rule (3) says the approval committee “may” fix the maximum an authorised vendor can collect, on its own motion or at a manufacturer’s request, and sub-rule (4) says it “shall notify fees and charges through a public notice”. I have found no public notice fixing a maximum for any of these five sectors. The order therefore sends every registered manufacturer of tea, electronics, paper, oil and leather to four sellers, with a three year authorisation and a statutory bar on buying from anyone else, at a price nobody has set. A trade association in any of the five sectors could make the request under sub-rule (3) this week, and should.

Two months of footage, and what it proves

A camera at the start and end of every line, at every packaging station and at the gate records the workers as surely as the goods, for two months at full resolution, and neither the Act nor the Rules say who at the Board may view it, for how long it may be kept once exported, or for what purpose beyond rule 150ZQT(1)(f), “data analytics for required legal actions”. The Personal Data Protection Bill, 2023, approved by the Federal Cabinet in July 2023, has still not been passed, hence no general law fills the silence, and a manufacturer should at least tell its workforce in writing what is recorded and who may see it.

The evidential question is the one that will decide cases. When a show cause notice alleges suppressed production on the strength of footage, or of a count produced by the Board’s “digital eye”, the taxpayer is entitled to ask how the recording is proved. The Honourable Supreme Court of Pakistan in Ishtiaq Ahmed Mirza v. Federation of Pakistan, PLD 2019 SC 675, held that no audio or video can be relied upon until it is proved genuine and untampered, that forensic examination is in practice required, that the person who made the recording should produce it and that its source must be disclosed. Article 164 of the Qanun-e-Shahadat Order, 1984, as substituted by the Criminal Laws (Amendment) Act, 2023, lets a court admit evidence from “modern devices or techniques” if it “deem[s] appropriate”, which is a discretion and not a rule. The Rules name no chain of custody at all: the recorder stands in the factory under the manufacturer’s duty of “protection and security” in rule 150ZQZE(d), the footage is the Board’s property, the Board exports it remotely, and the count is produced by software the taxpayer cannot inspect. Two months’ retention also means that the footage which would answer a notice issued in the fourth month is gone. A manufacturer should keep its own export of any disputed period beyond the two months, with the recorder’s log, since before the Appellate Tribunal Inland Revenue the Board’s property will be the Board’s evidence, and the taxpayer’s only answer will be its own copy.

What to do this week

Place the purchase order with one of the four authorised vendors before 15th October 2026 and keep the dated order and the vendor’s written delivery date, since rule 150ZQZA(4) gives the vendor up to ninety days and that document is the answer to a notice under serial 25. Write to the focal person named under paragraph 8, before the date, recording that the order is placed. Check whether any other Third Schedule good you make is already within rule 150ZQR(a), because the next order will come without a notification. Ask the approval committee, through the trade association, to fix the maximum fee. Report any outage within the hour, because the hour is in the rule and the rule carries the sealing power. And keep your own copy of the footage.

The Act now says what the order says. What the Act does not say is that eight days is enough.