Implementation of Track & Trace System: FBR seeks applications for grant of licence

The Federal Board of Revenue (FBR) has sought applications for grant of five years licence for implementation of Track and Trace System for cement, sugar and fertilizer sectors to monitor the clearances of duties/taxes paid items from around 100 units of these sectors.

The FBR has also asked the companies to provide price for Tax Stamp (Unique Identification Markings) with estimated quantity of 1.5 billion per year (As per Sales Tax Returns data) and unit price for per 1000 Tax stamps (Unique Identification Markings).

The FBR shall consider proposals only from those applicants who can demonstrate that they are currently providing Track and Trace solutions based on secure paper based stamps. The successful applicant will be issued a licence for a period of five (5) years to establish, maintain and operate a track and trace system in Pakistan in accordance with the Licensing Rules, 2019.

The applicant should have a yearly turnover of above US$50 million in any of the last three years or financial worth of US$25 million. The applicant should demonstrate that the capacity of stamping and coding equipment is 1 Billion or more stamps and codes per annum and it has the ability to be scaled up further as per requirements of the industry and FBR.

According to the FBR's new document, the FBR like all other tax authorities in the world aims at acquiring and implementing IT based tools and solutions in order to ensure enhanced revenue, improved monitoring and reliable revenue forecasting.

Though Large Scale Manufacturing (LSM), being the major and comparatively documented sector of our economy, contributes a sizeable chunk of revenue yet the real tax potential of LSM segments like Cigarette, Cement, Sugar, Beverages etc is yet to be realized. Currently across the globe Track and Trace technology offers the most feasible, reliable and straightforward solution.

With minimum human interface Track and Trace technology if implemented in a proper transparent manner it can safeguard the interest of revenue by mapping and capturing unregistered segment; act as anti-tax fraud tool entailing visible increase in revenue and dis-incentivizing under declaration and ensure level playing field to all in the aforesaid sectors.

In order to prevent leakage of revenue, under-reporting of production and sales of specified goods and to ensure proper payment of duties/taxes on the manufacture and sale of specified goods, the FBR is mandated to licence the implementation of a track and trace system; which is to be developed, operated and maintained by the licensee for specified goods manufactured in and imported into Pakistan.

To this end, the FBR is inviting applications for grant of licence to be issued under the Sales Tax Rules, 2006 for the development, maintenance and operation of track and trace system in accordance with the provisions of the rules and the instructions.

The FBR said that track and trace system must be able to provide FBR enforcement officials and delegated agencies with real-time information enabling them to monitor and control the movement of specified goods through the supply chain, including determination of the origin of the specified goods, as well as to determine their legal status.

The track and trace system to be developed and operated must enable FBR enforcement officials and delegated agencies in the field to use the data that can be readable /translatable for the purpose of licensing to enable automatic authentication of unique identification markings and capture traceability information securely in both offline and online modes. The solution must be capable of geo-mapping of the areas where monitoring will be carried out.

Foreign specified goods imported into Pakistan will have unique identification markings, applicable for Pakistan, already affixed or printed at the point of manufacture outside of country. Similarly, any specified goods produced in Pakistan for export shall be required to carry unique identification markings for intended destination markets.

The licensee must guarantee to factor these requirements into the system to ensure readability for imported products and application for exported products as per Licensing Rules, 2019.

The FBR added that the licensee will be responsible for operationalizing the track and trace system within a time frame of nine (09) months of issuing of a licence. In case the licensee cannot operationalise the track and trace system within 09 months or is unable to operate the system during the term of the licence the unconditional bank guarantee amounting to PKR 100 Million (Rupees Hundred Million) submitted by the licensee shall be forfeited.

In case of genuine hardships and the circumstances beyond the control of licensee, the Committee may consider the request for three (3) months extension in time frame. If the track and trace system is not operational within twelve (12) months of the issuance of license, the licence would be liable for cancelation in accordance with the provision of Licensing Rules, 2019, FBR added.