FBR mandates sales tax invoices for advance payments

Islamabad: The Federal Board of Revenue (FBR) has introduced a new procedure requiring sales tax-registered taxpayers to issue advance receipt invoices for advance payments received against supplies. The FBR issued SRO 2063(I)/2026 to amend the Sales Tax Rules, 2006. When a registered taxpayer receives an advance payment for a supply, whether in full or partial or through multiple installments, they must issue an advance receipt invoice at the time of each payment.

This invoice must contain specific details from section 23 of the Sales Tax Act, 1990, and account for the output tax payable on the advance payment in the tax period it is received. Such invoices will be treated as tax invoices for sections 7 and 8 of the Act. If multiple advance payments are received for the same supply, a separate invoice must be issued for each.

Every subsequent advance receipt invoice must be electronically linked to the previous one to maintain traceability of all advance payments related to that supply. When the supply is made against the advance payment or payments, a final sales tax invoice is issued, referencing the relevant advance receipt invoice. The value and sales tax already accounted for against these invoices should not be accounted for again.

The sales tax on the remaining value of the supply is only calculated on the non-accounted amount. The rate of sales tax for each advance payment is the rate in effect at the time of receipt, while the rate for the remaining supply value is determined by the supply's actual date. If any changes occur in the advance payment or supply value, the FBR mandates adjustments in accordance with section 9 of the Act and rules 19 to 22.

Any advance receipt invoices, debit notes, or credit notes issued must be electronically linked and maintained per the prescribed rules or direction from the board to ensure complete transaction identification and traceability.