FBR sets out when goods and services are treated as supplied, determining the sales tax period in which transactions must be reported.
ISLAMABAD: The Federal Board of Revenue (FBR) has clarified the rules governing the “time of supply” for sales tax purposes during Tax Year 2027, setting out when transactions are considered to have taken place for sales tax accounting and reporting.
The FBR has issued the Sales Tax Act, 1990, updated up to June 30, 2026, which defines the point at which a supply is treated as having occurred for the purposes of sales tax payment and deduction.
The timing of a supply determines the tax period in which the transaction must be accounted for in the sales tax return.
Time of supply for goods
For a supply of goods, other than goods supplied under a hire purchase agreement, the time of supply is generally the earlier of:
• the time when the goods are delivered or made available to the recipient; or
• the time when any payment is received by the supplier in respect of the supply.
Therefore, if payment is received before the goods are delivered or made available, the date of payment will determine the time of supply.
This rule means that receiving an advance or other payment can trigger the sales tax accounting requirement before the physical delivery of the goods.
Goods supplied under hire purchase
For goods supplied under a hire purchase agreement, the time of supply is the date on which the agreement is entered into.
The specific provision determines the relevant sales tax period for hire purchase transactions and differs from the general rule applicable to other supplies of goods.
Time of supply for services
In the case of services, the time of supply is the point at which the services are rendered or provided.
This establishes when a service transaction becomes relevant for sales tax accounting and reporting purposes.
Treatment of part payments
The FBR has also specified the treatment of part payments received against a supply.
Where any part payment is received for a supply during a tax period, the amount must be accounted for in the sales tax return for that particular tax period.
This ensures that sales tax treatment is applied to payments in the period in which they are received, where the relevant time-of-supply rule is triggered.
Treatment of exempt supplies
For an exempt supply, where the exemption is subsequently withdrawn, the amount is to be accounted for in the return for the tax period during which the exemption is withdrawn.
The provision determines the relevant reporting period when the tax treatment of an otherwise exempt supply changes.
The time-of-supply provisions form an important part of Pakistan’s sales tax framework, as they determine when transactions become reportable for sales tax purposes and establish the appropriate tax period for accounting and payment.
For businesses, correctly identifying the time of supply is therefore essential for ensuring that sales and services are reported in the appropriate sales tax return.