ISLAMABAD: The Federal Board of Revenue (FBR) has made sales tax invoices mandatory for registered taxpayers on advance payments received againstfuture supplies.
The new procedures notified through SRO2063 of 2026 also require taxpayers to declare output taxin the return for the tax period in which the payments are received.
Under the new rules, taxpayers receiving multiple advance payments against a single supply will be required to issue a separate invoice for each payment and electronically link it with earlier invoices to ensure complete traceability of the transaction.
As per the amendments, taxpayers will be required to issue a final sales tax invoice when the actual supply is made, with references to earlier advance payment invoices. However, the value and sales tax already accounted for on advance payments will not be counted again. Moreover, sales tax on any outstanding amount will be calculated only on the remaining value of the supply.
The invoice must contain the applicable particulars prescribed under Section 23 of the Act. The taxpayer will also be required to account for and declare the output sales tax payable onthe advance payment in the return for the tax period in which the amount is received.
The FBR has clarified that advance payments will be subject to the sales tax rate prevailing at the time of receipt, while any remaining amount will be taxed at the rate applicable when the actual supply is made.
The amended rules also provide for adjustments where advance payments or the value of supplies are increased, reduced or refunded, or where supplies are cancelled wholly or partly. Such adjustments will be made in accordance with Section 9 of the Sales Tax Act and the procedures prescribed under Rules 19 to 22.
The notification further provides that when the actual supply is made, the registered person must issue a final sales tax invoice referring to the relevant advance receipt invoices.
The new rules also require taxpayers to electronically link and maintain all advance payment invoices, debit and credit notes and final sales invoices in the prescribed manner to ensure proper identification, cross-referencing and complete traceability of each transaction.
The revised procedure establishes a mechanism to account for sales tax when advance payments are received, while ensuring the same amount is not taxed again when the final supply is made.