You can use a standard PC running squid as a proxy.
_OR_ use a better device, LINUX based, or openwrt, which can do native logging via proxy.
I don't know much about squid, only work on this for filtering.
As he mentioned - "NB: Our govt. wants every local/zonal ISP to provide user activity log anytime they ask for suspicious activity."
I believe these need to be logged as well - timestamp, mac address, IP address, URL, and maybe hostname
I don't think squid can log mac address and hostname right?