SRO 2063(I)/2026 requires registered businesses to issue advance receipt invoices, declare output tax upon receiving payments and electronically link invoices with final sales invoices.
ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a new mechanism for accounting for advance payments received against supplies under the Sales Tax Rules, 2002.
The FBR notified the changes through SRO 2063(I)/2026 on Thursday, introducing Rule 160 to establish procedures for issuing invoices, declaring output tax and adjusting sales tax when businesses receive advance payments.
Under the new Rule 160, registered persons covered by Section 23 of the Sales Tax Act, 1990, receiving advance payments against supplies must issue an advance receipt invoice at the time of receiving each payment.
The invoice must contain the particulars specified under Section 23, to the extent applicable. Businesses are also required to account for and declare the output tax payable in the sales tax return for the tax period in which the advance payment is received.
The advance receipt invoice will be treated as a tax invoice for the purposes of Sections 7 and 8 of the Sales Tax Act.
Where businesses receive multiple advance payments against the same supply, they must issue a separate receipt invoice for each payment. Subsequent invoices must be electronically linked with previous invoices to ensure complete traceability.
When the actual supply takes place, businesses must issue a final sales tax invoice referencing the relevant advance receipt invoices.
However, the value and sales tax already declared against advance payments cannot be accounted for again. Sales tax on the remaining value will be calculated only on the portion not previously accounted for.
The new rules also clarify the applicable sales tax rates. The rate in force on the date of receiving each advance payment will apply to that payment, while the rate applicable on the date of supply will apply to the remaining value.
In cases where advance payments or the underlying supply value are increased, reduced or refunded, businesses must make corresponding adjustments under Section 9 of the Sales Tax Act and Rules 19 to 22.
The same procedure will apply where a supply is cancelled wholly or partly.
Furthermore, the FBR has made electronic linking mandatory for advance receipt invoices, related debit and credit notes, and final sales invoices.
The requirement is intended to ensure proper identification, cross-referencing and traceability of transactions under the revised sales tax framework.
The changes establish a clearer accounting mechanism for businesses receiving advance payments and aim to prevent duplicate declaration of sales tax when supplies are subsequently completed.