In Pakistan, maintaining proper sales tax documentation is not just a legal requirement — it’s a crucial part of financial transparency and compliance. One of the most critical documents in this regard is the Sales Tax Invoice.
Whether you’re a registered business under FBR or a provincial tax authority like SRB or PRA, understanding how to issue a compliant sales tax invoice is key to avoiding penalties, maintaining customer trust, and claiming input tax credits. This article offers a detailed guide on how to make a sales tax invoice in Pakistan, especially helpful for SMEs, freelancers, and service providers.
What Is a Sales Tax Invoice?
A Sales Tax Invoice is a document issued by a registered seller to a buyer that outlines the details of a transaction, including the value of goods or services sold and the amount of sales tax charged.
This invoice serves multiple purposes:
- It enables the buyer to claim input tax.
- It documents the output tax liability of the seller.
- It ensures transparency and accuracy in financial reporting.
In Pakistan, all registered persons under the Sales Tax Act, 1990 are required to issue tax invoices for taxable supplies.
Who Is Required to Issue a Sales Tax Invoice?
According to FBR regulations, a sales tax invoice must be issued by:
- Manufacturers
- Wholesalers
- Distributors
- Importers
- Service providers (if registered under Sales Tax on Services in provinces)
If your business supplies taxable goods or services and you are registered for sales tax, it is mandatory to issue tax invoices for every taxable sale.
Legal Framework Governing Sales Tax Invoices in Pakistan
Sales tax invoicing requirements are defined under:
- Section 23 of the Sales Tax Act, 1990
- Chapter IV of the Sales Tax Rules, 2006
These laws describe the format, content, and issuance process of invoices. Provinces like Sindh and Punjab also have their own versions for service providers under SRB, PRA, etc.
Failure to issue a compliant invoice can result in:
- Rejection of input tax claims
- Audits and legal penalties
- Customer disputes
Hence, it’s essential to ensure that your invoice meets all legal requirements.
When Should You Issue a Sales Tax Invoice?
You must issue a sales tax invoice at the time of supply. The “time of supply” depends on the nature of the transaction:
- For goods: when the goods are delivered or made available.
- For services: when the service is performed or when the payment is received (whichever is earlier).
Timely issuance of the invoice ensures proper tax compliance and avoids discrepancies in monthly sales tax return filing.
Essential Components of a Sales Tax Invoice
The Sales Tax Rules, 2006 specify that a valid invoice must contain the following information:
- Invoice Number and Date
- A unique serial number.
- The date of issue.
- Name, Address, and NTN of the Seller
- Including Sales Tax Registration Number (STRN).
- Name, Address, and NTN/STRN of the Buyer
- Mandatory for registered buyers.
- Optional for unregistered customers unless specified.
- Description of Goods/Services
- Nature, quality, and quantity.
- Value of Supply (Excluding Tax)
- Rate and Amount of Sales Tax Charged
- Should reflect the applicable rate (e.g., 18%, 13%, etc.)
- Total Amount (Including Tax)
- Any Discounts Given
- Signatures and Stamp
- Optional for digital invoices but recommended.
Sample Format of Sales Tax Invoice
Here’s an example format of a typical sales tax invoice in Pakistan:
Company Name: ABC Enterprises
NTN: 1234567-8
STRN: 3456789012345
Address: Plot 101, Industrial Area, Lahore
Phone: 042-1234567
Sales Tax Invoice
Invoice No.: INV-2025-001
Date: 05-Aug-2025
Customer Name: XYZ Distributors
Customer NTN: 2345678-9
Customer STRN: 4567890123456
Address: Plot 45, Shahrah-e-Faisal, Karachi
| Sr | Item Description | Qty | Rate | Value | Tax Rate | Tax Amount | Total |
|---|---|---|---|---|---|---|---|
| 1 | LED Bulbs 12W | 100 | Rs.120 | Rs.12,000 | 18% | Rs.2,160 | Rs.14,160 |
| 2 | Energy Saver 18W | 50 | Rs.200 | Rs.10,000 | 18% | Rs.1,800 | Rs.11,800 |
| Total | Rs.22,000 | Rs.3,960 | Rs.25,960 |
Remarks: Thank you for your business.
Authorized Signature: _______________
How to Generate a Sales Tax Invoice (Step-by-Step)
Here’s a simple step-by-step breakdown for creating a compliant sales tax invoice in Pakistan:
Step 1: Confirm Your STRN and Customer’s STRN
Ensure that both your business and the buyer are registered with the FBR (or provincial authority). If you’re issuing to an unregistered customer, mention “Unregistered Buyer.”
Step 2: Use a Unique Invoice Numbering System
Start with a serial number like “INV-2025-001” and maintain sequence in your records.
Step 3: List All Necessary Details
Add all mandatory information such as date, item description, tax rate, and tax amount.
Step 4: Calculate Tax Properly
Calculate sales tax accurately. For example, if your item is worth Rs.1,000 and the tax rate is 18%, the tax amount will be Rs.180.
Step 5: Issue the Invoice
Provide a printed or digital copy to the buyer and keep a copy for records (minimum 6 years as per FBR).
Sales Tax Invoice Requirements for Digital Businesses
In today’s digital world, many freelancers and online service providers are also liable to register and issue tax invoices.
For digital services, the following applies:
- Invoices can be in PDF format.
- Must include digital signature or official company stamp.
- Delivery of the invoice can be via email.
Digital service providers should also maintain logs and records of each invoice issued.
Common Mistakes to Avoid
When issuing sales tax invoices, businesses often make the following errors:
- Incorrect Tax Rates
Make sure you’re applying the correct percentage as per FBR/SRB notifications. - Omitting Buyer Details
If selling to another registered entity, always mention their STRN. - Improper Formatting
Lack of invoice number or date can make the invoice invalid. - Manual Errors in Tax Calculation
Use reliable accounting software or templates to automate calculations. - Not Keeping Records
Failing to keep a digital or printed archive of invoices may result in audit penalties.
Tips for Small Businesses and Freelancers
If you’re a small enterprise or a freelancer, the process may feel overwhelming. Here are some tips to simplify the process:
- Use Accounting Software: Tools like QuickBooks, Wave, or even Excel templates can streamline invoice creation.
- Consult a Tax Advisor: Avoid legal issues by working with a tax consultant or firm.
- Automate Monthly Filing: Issue invoices regularly and reconcile them during Sales Tax Return Filing.
- Register for Sales Tax Early: If your business is approaching the registration threshold, get registered to stay compliant.
Special Considerations for Service Providers
Under provincial laws like SRB (Sindh Revenue Board), PRA (Punjab Revenue Authority), or KPKRA (Khyber Pakhtunkhwa Revenue Authority), service providers must:
- Issue invoices mentioning Service Description, HS Code, Rate, and Amount of Sales Tax.
- File returns monthly using the invoice data.
For instance, digital marketing agencies, freelancers, event planners, and consultants must follow this guideline.
Penalties for Not Issuing Sales Tax Invoices
Non-compliance can attract strict penalties from FBR and other authorities. These include:
| Offense | Penalty |
|---|---|
| Not issuing invoice | Rs. 5,000 or 3% of tax involved (whichever is higher) |
| Incorrect invoice | Rs. 10,000 or 5% of tax involved |
| Failure to maintain records | Rs. 25,000 or higher audit scrutiny |
These penalties highlight why proper invoice generation and record keeping are crucial.