The Federal Board of Revenue (FBR) has introduced new rules requiring sales tax registered businesses to issue separate invoices whenever they receive advance payments for goods or services, including payments made in installments.
The changes have been notified through S.R.O. 2063(I)/2026, amending the Sales Tax Rules, 2006. Under the revised procedure, businesses must issue an advance receipt invoice every time they receive a payment and declare the applicable sales tax in the return for that tax period.
Separate Invoice for Every Advance Payment
Under the new rules, each advance receipt invoice must contain the information required under Section 23 of the Sales Tax Act. These documents will also be treated as tax invoices for the purposes of Sections 7 and 8 of the Act.
Businesses receiving multiple advance payments for the same transaction will have to generate a separate invoice for each installment. Every new invoice must be electronically linked to the earlier invoices to maintain a complete payment record.
Once the goods or services are delivered, businesses must issue a final sales tax invoice containing references to all advance receipt invoices issued for that transaction.
The advance amounts and sales tax already declared cannot be counted again when calculating the tax payable on the final supply.
FBR Clarifies Sales Tax Rates on Advance Payments
The FBR has also explained how different sales tax rates will apply when advance payments and final supplies fall in separate tax periods.
For every advance payment, businesses must apply the sales tax rate in force on the date the payment is received.
However, the remaining amount will be taxed at the rate applicable when the actual supply takes place. Any additional tax will be calculated only on the portion of the transaction that was not covered by advance payments.
Refunds and Cancellations Require Tax Adjustments
The revised rules also cover situations where advance payments or the value of a supply changes, or where an amount is refunded.
In such cases, businesses must adjust their sales tax records under Section 9 of the Sales Tax Act and Rules 19 to 22 of the Sales Tax Rules. The same requirements will apply when a transaction is partially or completely cancelled.
The FBR has also made electronic linking and record-keeping mandatory for advance receipt invoices, debit notes, credit notes and final sales tax invoices.
The changes are aimed at improving transaction tracking and ensuring that sales tax on advance payments is properly recorded without being charged twice when the final supply takes place.
