If you are registered for sales tax, the invoice you hand a customer is more than a parchi. It is a legal record. Your buyer may use it to claim input tax, and you use the same numbers to file your monthly return. A missing registration number or a wrong tax total can create problems for both of you.
This guide explains the general shape of a sales tax invoice and the arithmetic behind it. Tax rules change through budgets and notifications, and some goods have special rates or exemptions. Treat this as a working explanation and confirm current rates and requirements with FBR or your tax advisor before you rely on any detail.
Who needs to issue a sales tax invoice
Businesses registered for sales tax are generally expected to issue a tax invoice for taxable supplies. Wholesalers and distributors selling to other registered businesses deal with this every day, because their buyers ask for a proper invoice before they pay. Retailers also face rules that depend on their size and category. Whether you must register, and from when, is a question for your tax advisor. Once you are registered, assume every taxable sale needs a correct invoice.
What a sales tax invoice contains
The exact format can vary, but a proper sales tax invoice usually carries the following information:
- Seller details: your business name and address as registered.
- Seller registration numbers: your NTN and your sales tax registration number, the STRN.
- Buyer details: the buyer's name and address, and their NTN or STRN if they are registered.
- Invoice number and date: a serial number that does not repeat or skip, and the date of supply.
- Description of goods: clear enough that someone else can tell what was sold, for example 'Cooking oil 5 litre tin' rather than 'oil'.
- Quantity and unit: cartons, tins, bags, pieces or kilograms.
- Value excluding tax: the price before sales tax, line by line.
- Tax rate and tax amount: the rate applied and the rupee amount of tax on each line or on the total.
- Total including tax: what the buyer actually pays.
Many businesses also print payment terms, bank details and a signature line. These are useful but secondary. The fields above are the ones that matter for tax.
Worked example: calculating the tax lines
The standard rate has been 18%; check FBR for current rules, because some items carry reduced rates, fixed amounts or exemptions. Using 18% only to show the arithmetic, here is an invoice from a Faisalabad wholesaler to a registered retailer:
| Item | Qty | Rate (Rs) | Value excl. tax (Rs) | Tax at 18% (Rs) | Total (Rs) |
|---|---|---|---|---|---|
| Cooking oil 5L tin | 20 | 4,500 | 90,000 | 16,200 | 106,200 |
| Detergent 1kg pack | 40 | 550 | 22,000 | 3,960 | 25,960 |
| Total | 112,000 | 20,160 | 132,160 |
Check the arithmetic the way an auditor would: 20 x 4,500 = 90,000, and 18% of 90,000 = 16,200. 40 x 550 = 22,000, and 18% of 22,000 = 3,960. The value column adds to 112,000, the tax column adds to 20,160, and the two together make 132,160. If any of these do not tie, the invoice is wrong.
When your price already includes tax
Many shopkeepers quote a single price that already includes tax. To split it, divide the inclusive price by 1 plus the rate. At 18%, an inclusive price of Rs 11,800 gives 11,800 / 1.18 = Rs 10,000 value and Rs 1,800 tax. A common mistake is to take 18% of 11,800 (Rs 2,124) and call that the tax. That overstates the tax and understates your sales value.
Input tax and output tax in plain words
Output tax is the tax you charge on your sales. Input tax is the tax you paid on your purchases from registered suppliers. In broad terms, a registered business pays the difference. Suppose that in a month you bought stock for Rs 70,000 plus Rs 12,600 tax, and sold it for Rs 90,000 plus Rs 16,200 tax. Your output tax is 16,200, your input tax is 12,600, and the difference is Rs 3,600.
Claiming input tax has conditions, including holding valid invoices from registered suppliers and filing on time. Ask your tax advisor which purchases qualify in your case.
This is why your buyers care so much about your invoice. If your STRN is missing or your numbers are wrong, their claim on your invoice may be at risk, and they will come back to you.
Common mistakes and how to avoid them
- Handwritten invoice books with gaps. A torn page or a skipped number raises questions. Use one numbered series and cancel spoiled invoices instead of throwing them away.
- Rounding on every line differently. Decide whether you round per line or on the total, and do it the same way every time.
- Missing buyer registration details. Collect the buyer's NTN and STRN when you open their account, not when they ask for a corrected invoice.
- Vague descriptions. 'Misc goods' tells nobody anything. Write what was sold.
- Returns handled with cash only. When goods come back, issue a credit note that refers to the original invoice so your tax totals stay correct.
- Totals that do not match the ledger. If the invoice says Rs 132,160 but the customer's account shows Rs 132,000, someone will ask why.
Discounts, freight and other extras on the invoice
Real invoices are rarely as tidy as the example. A trade discount, a delivery charge or a loading charge changes the numbers, and each one should be shown clearly. A simple practice is to apply any discount before tax, so the tax is calculated on the price the buyer actually pays. For example, if 20 tins at Rs 4,500 come to Rs 90,000 and you give a 5% discount, the discounted value is Rs 85,500, and tax at 18% on that is Rs 15,390, for a total of Rs 100,890. Whether delivery and other charges are taxed, and how, depends on the rules for your goods, so confirm this with your advisor and then apply it the same way on every invoice.
Keeping records your advisor can use
At the end of each month your tax advisor or accountant needs a sales register (every invoice with value and tax), a purchase register (every supplier bill with value and tax), and the credit and debit notes in between. If these live in three different registers and a stack of carbon copies, preparing the return takes days and errors slip in.
Billing software that stores the buyer's registration numbers, calculates tax per line and produces monthly summaries cuts this work down. Taajir includes an FBR-style GST report built from the same invoices you print, which your accountant files from, and you can read more about this on the GST invoicing software page. Restaurants and retail counters that must report each sale to FBR or PRA as it happens need an integrated POS instead; see FBR integrated POS. Whatever tool you use, the rule is the same: the invoice, the ledger and the tax report should all show the same numbers.
A simple checklist before you hand over an invoice
- Your name, NTN and STRN are printed correctly.
- The buyer's name, and their NTN or STRN if registered, are filled in.
- The invoice number follows the previous one with no gap.
- Each line shows quantity, value excluding tax, rate and tax amount.
- Line totals add up to the invoice total.
- A copy is kept, on paper or in your software, for your records.
Get these six points right on every invoice and month-end becomes a matter of printing reports rather than chasing paper. For the latest rates, thresholds and filing dates, go to FBR or your tax advisor; they change more often than most shop owners expect.