FBR Introduces Electronic Sales Tax Invoice Rules to Modernize Transaction Recording

FBR Introduces Electronic Sales Tax Invoice Rules to Modernize Transaction Recording

Islamabad, November 10, 2023 – The Federal Board of Revenue (FBR) has taken a significant step toward modernizing tax documentation with the issuance of rules for electronic sales tax invoices.

The FBR’s move, outlined in SRO 1525(I)/2023, involves amendments to the Sales Tax Rules, 2006, and establishes a framework for the issuance and management of electronic invoices by registered businesses.

Under the amended rules, an entity eligible to use the electronic invoicing system, referred to as the integrated supplier, must install an electronic invoicing system provided by a person licensed under Chapter XIV-BB of the Sales Tax Rules, 2006. The rules make it clear that no sale or supply by an integrated supplier is permitted without being recorded in the electronic invoicing system.

The key provisions of the new rules include:

Eligibility Criteria: A registered person, identified under rule 150Q, is designated as the integrated supplier and is required to use the electronic invoicing system.

Issuance of Electronic Invoice: The integrated supplier is mandated to issue a real-time verifiable electronic sales tax invoice for every taxable supply and service. The invoice must contain information as prescribed under section 23 of the Act. Additionally, the registered person is obligated to retain records and documents for a period of six years on electronic media as provided under section 24 of the Act.

Integration and Compliance: Integrated suppliers must comply with all requirements specified by the Board for integration, recording, storage, issuance, and transmission of verifiable electronic invoices in real-time. This includes provisions for any necessary hardware, software, or connectivity.

Audit Access: Integrated suppliers are required to grant physical and online remote access to records, systems, logs, and documents maintained in electronic form when requested by an officer of Inland Revenue, as outlined in section 25 of the Act.

Penalties for Non-Compliance: In the event that an integrated supplier contravenes any provisions of this Chapter, penal action will be taken as per the relevant provisions of the Act. However, the integrated supplier has the option to apply to the Commissioner Inland Revenue for an extension of time for compliance, with the Commissioner having the authority to grant extensions of up to sixty days in aggregate, with fifteen-day intervals.

The FBR’s introduction of electronic sales tax invoicing rules is aimed at enhancing transparency, reducing the likelihood of tax evasion, and streamlining the tax documentation process. The move aligns with global trends in digital transformation and positions Pakistan’s tax system for increased efficiency in the digital era. Businesses falling under the purview of these rules are expected to adapt swiftly to the new requirements, fostering a more modern and accountable tax ecosystem.