The Federal Board of Revenue (FBR) has introduced new procedures requiring registered taxpayers to issue sales tax invoices against advance payments and declare the applicable output tax in their returns for the tax period in which the payments are received.
The procedures, notified through SRO 2063 of 2026, also require taxpayers receiving multiple advance payments for a single supply to issue a separate invoice for each payment. These invoices must be electronically linked with previously issued invoices to ensure transparency and traceability of transactions.
Under the amended rules, taxpayers must issue a final sales tax invoice once the actual supply is made, referring to all relevant invoices issued against advance payments. However, the value and sales tax already declared on advance payments will not be taxed again. Tax on any outstanding amount will be calculated only on the remaining value of the supply.
The invoices must include all mandatory details prescribed under Section 23 of the Sales Tax Act. Taxpayers are also required to declare the output sales tax payable on advance payments in the return for the period during which the amounts are received.
The FBR has clarified that advance payments will be taxed at the sales tax rate applicable on the date of receipt, while the remaining amount will be subject to the rate in force when the actual supply takes place.
The amended regulations also outline procedures for adjustments in cases where advance payments or supply values are increased, reduced or refunded, or where a supply is cancelled either partially or entirely. Such adjustments will be governed by Section 9 of the Sales Tax Act and the procedures outlined in Rules 19 to 22.
Furthermore, registered taxpayers must electronically link and maintain all advance payment invoices, debit notes, credit notes and final sales tax invoices in the prescribed manner. The requirement is aimed at ensuring accurate identification, cross-referencing and complete tracking of transactions.
The revised framework establishes a mechanism for collecting and accounting for sales tax at the advance payment stage while preventing double taxation when the final supply is completed.
