FBR requires sales tax invoices for advance payments

The Federal Board of Revenue has amended the Sales Tax Rules, 2006, requiring registered taxpayers covered by Section 23 of the Sales Tax Act to issue an advance receipt invoice when they receive payment against a supply. The change was made through SRO 2063(I)/2026, issued on November 5.

The taxpayer must declare output tax payable on each advance in the return for the tax period in which that payment is received. If a customer makes multiple advances for one supply, a separate invoice is required for every payment, with subsequent invoices electronically linked to the earlier ones.

When the supply is made, the taxpayer must issue a final sales tax invoice referring to the relevant advance receipt invoices. The value and tax already accounted for on the advances cannot be counted again; tax on any remaining value applies only to the amount not previously accounted for.

The tax rate for each advance is the rate in force when that payment is received. Any outstanding amount is taxed at the rate applicable when the supply is made. Advance receipt invoices, related debit or credit notes and final invoices must be electronically linked and maintained to support identification and cross-referencing of the transaction.

The rules also provide for adjustments under Section 9 of the Sales Tax Act and Rules 19 to 22 if an advance payment or the value of a supply is increased, reduced or refunded, or otherwise requires adjustment, and if a supply is cancelled wholly or partly.