Finance Act 2026 and the Autumn SROs: What Changed for Sales Tax

The Finance Act 2026, explained in FBR's explanatory circular on the sales tax and federal excise amendments, and a cluster of notifications issued in September 2026 have tightened sales tax compliance considerably. Here are the changes every registered business should know.

1. Invoices for exempt supplies and advance receipts

Section 23(1) now requires a tax invoice for exempt supplies as well as taxable ones, including an advance receipt invoice where payment is received before the supply, bearing a verifiable and unique FBR invoice number. The FBR-number condition applies from the date the Board notifies, and the Board decides who may issue advance receipt invoices. An "advance receipt invoice" is defined in section 2(1AA) as an invoice in the format the Board notifies.

For exempt supplies this largely formalises existing practice: rule 150R(9) of the Sales Tax Rules already required them to be invoiced through the integrated system.

2. Penalties for not integrating

• Failure to register or to integrate within the time FBR notifies: a penalty of up to Rs 1 million, and — since the Finance Act 2026 — a second penalty of up to Rs 5 million if the default continues one month after the first; the premises may be sealed with or without a penalty (section 33, Table, S. No. 25).
• Registration can be suspended for failure to integrate (section 21(2)).
• The Board may reduce the input tax ratio for persons who do not comply with digital invoicing and other electronic systems (section 8B).

3. Simulated invoices

Issuing an invoice without an actual supply attracts a penalty equal to the invoice's face value, and after a show-cause notice the issuer is placed on a public Simulated Invoice Issuers Register. Input tax claimed on that issuer's invoices is reversed automatically from the date of listing, and a buyer who does not reverse it within 60 days pays a further 20% penalty. Input tax that cannot be matched to the supplier's declared output tax attracts a 20% penalty (section 33, Table, S. Nos. 29–31). Buyers should verify suppliers and invoices, not just collect paper.

4. Debit and credit notes

The Board may prescribe an electronic mechanism for debit and credit notes (section 9). Under the amended Chapter XIV, debit notes, credit notes and advance receipt invoices are issued electronically and kept for six years.

5. Electronic scrutiny (SRO 1655(I)/2026)

A new Chapter XII-A of the Sales Tax Rules lets FBR's systems cross-match returns with other data and send intimations through IRIS, allowing at least seven days to explain or correct before action. A clean monthly reconciliation of your e-invoices, books and Annex-C is the best defence.

6. Stock transfer notes (STGO 25 of 2026)

Goods moved from a factory to your own warehouse under the same STRN are not a supply and need no digital invoice — but each consignment must travel with a prescribed stock transfer note, be acknowledged by the warehouse, reconciled and kept for six years. A warehouse with a separate STRN receives a taxable supply.

7. Federal excise duty on the invoice (SRO 1666(I)/2026)

Chapter XIV now also applies to federal excise duty and to Islamabad Capital Territory services. Invoices gain six FED particulars, and tax on invoices reported with an FBR number but not accounted for in Annex-C or the return can be recovered (rule 150XD(2)).

What to do now

• Confirm exempt supplies are invoiced through your integrated system, and watch for the Board's notification on FBR numbers for advance receipt invoices
• Set up stock transfer notes for warehouse movements
• Add FED particulars if you deal in excisable goods or services
• Reconcile e-invoices, books and Annex-C every month before filing
• Check suppliers before claiming input tax

The same Finance Act also reduced salaried income tax rates and removed the surcharge — see salary tax slabs for Tax Year 2027.