The Federal Board of Revenue (FBR), through SRO 2063/2026, has introduced revised procedures requiring registered persons to issue sales tax invoices upon receiving advance payments against future taxable supplies. The corresponding output sales tax must be declared in the tax period in which the advance payment is received. Where multiple advance payments are received against a single supply, a separate invoice must be issued for each receipt, with electronic linkage to earlier invoices to maintain transaction traceability.
The revised framework also addresses the treatment of advance payments when the actual supply is subsequently made. A final sales tax invoice must be issued, referencing the earlier advance payment invoices, while ensuring that the value and sales tax already accounted for are not taxed again. Importantly, the applicable sales tax rate on an advance payment will be the rate prevailing when the payment is received, whereas any outstanding consideration will attract the rate applicable when the actual supply takes place. Adjustments arising from cancellations, refunds or changes in transaction values will be governed by Section 9 of the Sales Tax Act, 1990, read with Rules 19 to 22.
For businesses, the implications extend beyond invoicing. Finance, taxation and ERP teams will need to ensure that advance receipts are properly identified, electronically invoiced and reconciled with final supplies. Particular attention should be given to contracts involving multiple instalments, long delivery periods and changes in applicable tax rates. Inadequate reconciliation could create discrepancies between accounting records, electronic invoices and sales tax returns.