According to the law of Pakistan, If a GST registered person is selling goods or services to the customers then he/she has to issue a tax invoice with certain necessary fields at the time of supply.
- Sales tax invoice
- Composite Invoice
- Sales tax invoices and time of supply
- Debit or Credit notes
- Cancellation or return of supply
- Increase in value of supply or amount of sales tax
- Invoices issued in foreign currencies
- Sales Tax Records
- Sales value and tax on all invoices
- Electronic invoicing in Pakistan
Sales tax invoice contains:
- A unique serial number for that financial year
- Name of the supplier
- Address of the supplier
- Registration number of the supplier
- Name of the purchaser
- Address of the purchaser
- Registration number of the purchaser
- Date of issue of the invoice
- Description of the goods or services
- Quantity of goods
- Value of goods or services without tax
- Amount of sales tax of goods or services
- Any discount rate
- Value with sales tax of goods or services
- Signature of the seller or his/her authorized representative
The composite invoice is issued when the seller is selling more than one type of goods or services to the buyer. For example, if a registered person is selling taxable as well as exempt goods or services to the buyer than he/she can issue a composite invoice.
The composite invoice must include the following information for each type:
- Description of goods or services / Quantity of goods
- Payable amount
- Sales tax rate
- Amount of tax
Sales tax invoices and time of supply
In Pakistan, specific rules apply regarding sales tax and time of supply. According to the Sales Tax Act, GST-registered businesses are due sales tax the moment there is a supply of goods or services.
Specifically, sales tax due for goods supplied is applicable at the time when the business settles the invoice amount. If it’s a service, the invoice has to capture the earlier of two things- supply of service and payment.
Note that tax levied on imports becomes due when the goods are cleared by customs.
Taxable persons can also issue simplified tax invoices or a cash memo when dealing with retail sales. The importance of having a sales tax invoice comes in when you have to input tax credit.
Debit or Credit notes
If the sales tax amount initially charged from the buyer has changed due to the return of goods/supply or for any other reason than the buyer and supplier has the authority to issue debt or credit notes to increase or reduce the sales tax amount on a supply.
This document must provide the details for the required adjustment. Additionally, it must reference the applicable sales tax invoice.
Cancellation or return of supply:
When registered persons supply goods or services and such supply is returned or canceled, then the buyer can issue a debit note with respect to that particular supply.
In such a case, the seller shall issue a credit note with the following information:
- Name of the seller
- Registration number of the seller
- The original value mentioned in the original invoice
- Sales tax mentioned in the original invoice
- Revised value of goods or services
- Revised sales tax
- The difference between original and revised value and sales tax
- The valid reason for this revision
- Signature of the authorized person issuing the credit note.
Increase in value of supply or amount of sales tax
If a registered supplier made supply and for some reason, the value of such supply or the sales tax has increased then the supplier shall issue a debit note with respect to that particular supply and the buyer shall issue a credit note with the same contents as mentioned above.
Invoices issued in foreign currencies
In the event that the sales tax invoice an individual has is denominated in a foreign currency, the law mandates that the invoice amounts have to be converted to the local currency- the Pakistani rupee. Accordingly, any such conversion has to be based on the exchange rates available on the open market.
Sales Tax Records
A person registered with sales tax must keep the sales tax records of all the goods/services sold, purchased or imported either in Urdu or English. The sales record should include the following information about goods/services:
- Description of goods or services
- Value of goods or services
- Name of the supplier
- Address of the supplier
- Amount of sales tax charged from the purchaser
Sales value and tax on all invoices
In some cases, registered persons or businesses will need to indicate sales tax amounts on all invoices they issue, but which happens at a time the actual tax has already been paid.
In such a scenario, and when the party involved does not qualify as a commercial importer, the business needs to indicate the both sales value and tax charged on every invoice they issue. For the record, the values are only meant for clarity and do not constitute an additional tax on the final returns.
Electronic invoicing in Pakistan
Pakistan allows for electronic invoices. However, this is on an opt-in basis which means that registered businesses wishing to use e-invoices have to get the authorization to do so.
The electronic invoicing system for sales tax invoices also applies to all taxable supply a registered entity makes. The invoices issued under the system must contain all the information stipulated under section 23 of the Sales Tax Act.
The use of e-invoicing applies where there are authenticity and integrity of origin, with invoice data either inclusive of an advanced e-signature or the transmission occurs via an approved data interchange. Both the issuer of the e-invoice and the buyer then transmit copies to the tax authority.
Businesses must keep a record of all e-invoices and retain them for five years.