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Many businesses are paid before they deliver: a deposit on machinery, a mobilisation advance on a contract, staged payments on a custom order. On 5 November 2026 the Federal Board of Revenue (FBR) issued S.R.O. 2063(I)/2026, which replaces rule 160 of the Sales Tax Rules, 2006 with a fuller procedure for accounting for advance payments against supplies. It applies to registered persons to whom section 23 of the Sales Tax Act, 1990, on tax invoices, applies.
What the new rule 160 requires
| Stage | What you must do |
|---|---|
| Each advance | Issue an advance receipt invoice when the payment is received, with the particulars in section 23 as far as they apply. This covers full payment, part payment and instalments. Declare the output tax in the return for the tax period in which the advance is received. |
| Further advances | Issue a separate advance receipt invoice for each payment, linked electronically to the earlier ones for the same supply, so every advance can be traced. |
| The supply | Issue a final sales tax invoice that refers to the advance receipt invoice or invoices. Do not account again for the value and tax already declared; charge tax only on the value not yet taxed. |
| Changes | If the advance or the value of the supply goes up or down, is refunded, or the supply is cancelled in whole or part, adjust under section 9 of the Act using debit and credit notes under rules 19 to 22. |
| Records | Keep every advance receipt invoice, the related debit and credit notes and the final invoice electronically linked, as the rules or FBR require under section 23. |
Which rate applies
The new rule also says which rate applies. The rate on each advance is the rate in force when that advance is received. The rate on the remaining value is the rate in force at the time of supply. So if the rate changes between an advance and delivery, the two parts of the same order are taxed at different rates.
A simple illustration: a customer pays an advance against Rs 400,000 of a Rs 1,000,000 order. You issue an advance receipt invoice for that Rs 400,000 and declare the tax on it in that month's return. On delivery, the final invoice refers to the advance receipt invoice and charges tax only on the remaining Rs 600,000.
What has changed from the old rule
- Every payment, not just one advance: the old rule referred to an advance payment in general terms. The new rule expressly covers full payments, part payments and instalments, each with its own invoice.
- Linking and traceability: advance receipt invoices, the final invoice and any debit or credit notes must be electronically linked.
- No double counting: the final invoice expressly excludes the value and tax already accounted for.
- Rates: the rule now states which rate applies to the advance and which to the balance.
- Adjustments: the old rule dealt only with cancellations, through a credit note. The new rule also covers increases, reductions and refunds, through the section 9 procedure.
As before, an advance receipt invoice is treated as a tax invoice for the purposes of sections 7 and 8 of the Act, the provisions on input tax. The Finance Act 2026 also wrote advance receipt invoices into section 23; see our note on the Finance Act 2026 sales tax changes.
What to do now
- List the contracts and orders on which you take deposits, advances or staged payments
- Issue an advance receipt invoice when each advance is received, and declare the tax in that month's return
- Check that your invoicing system, including any integration with FBR Digital Invoicing, can issue advance receipt invoices and record the links the rule requires
- On delivery, refer to every related advance receipt invoice on the final invoice and tax only the balance
- Apply the rate in force on the day of each advance, and the rate at the time of supply to the balance
- Handle price changes, refunds and cancellations through linked debit and credit notes
- Buyers: keep advance receipt invoices together with the final invoice to support input tax claims
For what every sales tax invoice must show, see our guide to sales tax invoice requirements. To make sure advances, credit notes and invoices agree with your return, use our reconciliation playbook.
How Veridian can help
Our tax practice reviews how advances are invoiced and declared, and our FBR digital invoicing service helps set up advance receipt invoices and linked credit and debit notes in your invoicing system. Book a consultation.
Official sources
Frequently asked questions
Is sales tax due on an advance payment in Pakistan?
Yes, for registered persons to whom section 23 of the Sales Tax Act applies. Under rule 160 of the Sales Tax Rules, as substituted by S.R.O. 2063(I)/2026, you issue an advance receipt invoice when the advance is received and declare the output tax in the return for that tax period.
Which sales tax rate applies to an advance?
The rate in force when the advance is received. The rest of the supply is taxed at the rate in force at the time of supply.
What if an order is cancelled after an advance has been invoiced?
Make the adjustment under section 9 of the Sales Tax Act, through a debit or credit note under rules 19 to 22 of the Sales Tax Rules, linked electronically to the advance receipt invoice.
This guide is general information based on the law as we understand it on the date shown, not advice for your situation. Tax rules change often — please speak to us before acting on it. See our disclaimer.