FBR Introduces New Invoice Rules for Advance Payments by Sales Tax Registered Businesses

The Federal Board of Revenue (FBR) has introduced new compliance requirements for sales tax registered businesses, obliging them to issue advance receipt invoices whenever they receive advance payments for goods or services, including payments made in installments. The changes were notified through S.R.O. 2063(I)/2026, which amends the Sales Tax Rules, 2006.

Under the revised procedure, a business must issue an invoice each time an advance payment is received and declare the applicable sales tax in the return for that tax period. Every advance receipt invoice must carry the information required under Section 23 of the Sales Tax Act, and these documents will be treated as tax invoices for the purposes of Sections 7 and 8 of the Act.

Where multiple advance payments are received against the same supply, a separate invoice must be issued for each payment, with each subsequent invoice electronically linked to the earlier ones to maintain a complete record of payments tied to the transaction. Once the goods or services are actually supplied, the business must issue a final sales tax invoice referencing all relevant advance receipt invoices. The value of the advance payments and the sales tax already declared cannot be counted again when calculating tax on the final supply.

The FBR has also clarified how sales tax rates will apply when advance payments precede the final supply. The rate applicable to each advance payment will be the rate in effect at the time that payment is received, while the remaining value of the supply will be taxed at the rate in effect when the supply takes place. Any additional tax will be calculated only on the portion of the transaction not already covered by advance payments.

If an advance payment or the value of the underlying supply increases, decreases or is refunded, businesses must make the corresponding adjustments under Section 9 of the Sales Tax Act and Rules 19 to 22 of the Sales Tax Rules. The same procedure applies where a supply is partially or completely cancelled.

The FBR has further required businesses to electronically link and maintain all advance receipt invoices, debit notes, credit notes and final sales tax invoices. The system is intended to ensure proper identification, cross-referencing and complete traceability of transactions involving advance payments.