FBR makes sales tax invoices mandatory for advance payments
The Federal Board of Revenue has required registered taxpayers to issue sales tax invoices for advance payments received against future supplies. The procedures were notified through SRO 2063 of 2026.
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- Registered taxpayers must issue a sales tax invoice for each advance payment received.
- Tax on an advance must be declared in the return for the period in which it is received.
- Amounts already taxed will not be taxed again at the final supply.
The Federal Board of Revenue (FBR) has required registered taxpayers to issue sales tax invoices for advance payments they receive against future supplies. The procedures were notified through SRO 2063(I) of 2026, according to TechJuice and 24 News Business.
Under the SRO, the FBR has substituted Rule 160 of the Sales Tax Rules, 2006. The amended rules set requirements for invoicing, tax declaration and electronic recordkeeping of advance payments. 24 News Business said the revision was first reported by the 24NewsHD TV channel on Friday.
Taxpayers who receive full or partial advance payments, including instalments, must issue an advance receipt invoice each time a payment comes in. The output sales tax on the advance must be declared in the return for the tax period in which the amount is received, not deferred until the supply is completed.
Each invoice must carry the particulars prescribed under Section 23 of the Sales Tax Act and will be treated as a tax invoice for Sections 7 and 8. Where several advance payments are received against a single supply, a separate invoice must be issued for each, and the invoices must be electronically linked to one another for traceability.
When the actual supply is made, a final sales tax invoice must be issued that refers to the relevant advance payment invoices. Value and tax already accounted for on advances will not be counted again, and tax on any outstanding amount will be calculated only on the remaining value of the supply.
On rates, an advance payment is taxed at the rate in force when it is received. Any remaining amount is taxed at the rate applicable on the date of the actual supply.
The rules also cover later changes. Adjustments for advance payments or supply values that are increased, reduced or refunded, and for supplies cancelled in full or in part, will be made under Section 9 of the Sales Tax Act and Rules 19 to 22. Taxpayers must electronically link and maintain advance payment invoices, debit and credit notes, and final sales invoices in the prescribed manner.
Background
khabr.pk reported on 6 November that Prime Minister Shehbaz Sharif directed authorities to prepare a roadmap with timelines and targets for a fully digital payment system. The same day, we reported the IMF's Pakistan representative calling for a broader, simpler, fairer and more predictable tax system.
Why it matters
Businesses in Pakistan that take deposits, instalments or other advances from customers must now issue a sales tax invoice at the time of each payment. They must also declare the tax in the return for that period instead of waiting for delivery. Firms will need to link advance, final and adjustment documents electronically and keep them on record. The rules say tax already paid on an advance will not be charged again at the final supply.
