ISLAMABAD: The Federal Board of Revenue (FBR) has required registered taxpayers to issue sales tax invoices for advance payments received against future supplies. The procedures were notified through SRO 2063 of 2026.
Taxpayers must declare the output sales tax on an advance payment in the return for the tax period in which the amount is received. Each invoice must carry the particulars prescribed under Section 23 of the Sales Tax Act.
Where a taxpayer receives multiple advance payments against a single supply, a separate invoice must be issued for each payment. Each invoice must be electronically linked to the earlier ones to ensure complete traceability.
When the actual supply is made, the taxpayer must issue a final sales tax invoice that references the relevant advance payment invoices. The value and tax already accounted for on advance payments will not be counted again. Sales tax on any outstanding amount will be calculated only on the remaining value of the supply.
The FBR has clarified that advance payments will be taxed at the rate in force when they are received. Any remaining amount will be taxed at the rate applicable on the date of the actual supply.
The rules also provide for adjustments where advance payments or the value of supplies are increased, reduced or refunded, or where supplies are cancelled in whole or in part. These adjustments will be made under Section 9 of the Sales Tax Act and Rules 19 to 22.
Taxpayers must also electronically link and maintain all advance payment invoices, debit and credit notes, and final sales invoices in the prescribed manner. This is intended to ensure proper identification and cross-referencing of each transaction.
The revised procedure sets out how sales tax is to be accounted for on advance payments, while ensuring the same amount is not taxed again at the time of the final supply.
