The FBR's new e-invoicing penalty system is now active. Find out which businesses are affected and what the penalties are for non-compliance, starting at Rs500,000.
FBR's E-Invoicing Penalty System Now Active for Businesses
Islamabad - The Federal Board of Revenue (FBR) has officially begun the enforcement of its much-anticipated e-invoicing penalty system, with the new regulations taking effect from September 1, 2025. This move introduces a regime of significant financial penalties for non-compliant businesses, with initial fines starting at a substantial Rs500,000.
The implementation of this system is a major step in the FBR's ongoing efforts to digitize Pakistan's economy, enhance tax transparency, and curb the pervasive issue of tax evasion facilitated through unregistered or "flying" invoices.
The FBR's new system is not a blanket regulation; it primarily targets a specific tier of the business community. These businesses include all importers, public companies, and any business with an annual turnover exceeding Rs1 billion over their last twelve sales tax returns.
These designated entities are now legally mandated to have their invoicing systems fully integrated with the FBR's central digital framework. This integration is designed to ensure the real-time reporting of all sales tax transactions, providing the tax authority with an immediate and transparent view of economic activity.
The legal authority for these penalties is derived from Section 25A of the Sales Tax Act, 1990. Under this provision, FBR's field formations are now empowered to issue penalties to any registered person who has failed to integrate their systems as required.
The penalty structure is designed to escalate for repeat offenders. While the initial fine is Rs500,000, this amount can increase to Rs1 million, Rs2 million, and even Rs3 million, depending on the severity of the non-compliance. This tiered approach is intended to act as a strong deterrent.
A critical consequence of this regulation is the change in the legal status of invoices. Any sales tax invoice issued outside the prescribed digital framework will now be considered illegal and invalid for tax purposes. This has significant implications for the entire supply chain, as purchasers will not be permitted to claim input tax adjustments based on such invoices, directly impacting their tax credits.
While large enterprises are largely expected to comply with the new requirements under SRO 1413(I)/2025, there are growing concerns about the readiness of other business segments. Experts have pointed out that small, medium, and seasonal importers may face considerable challenges in achieving immediate integration due to technical and financial constraints.
In light of these challenges, and considering the widespread flooding that has affected businesses nationwide, some experts have urged the FBR to consider extending the deadline. They argue that a grace period would allow struggling businesses more time to adapt. However, despite these calls, the official stance remains firm on the September 1st enforcement date.
Tax specialists are therefore strongly advising all registered taxpayers to prioritize the prompt adoption of the electronic system. They emphasize that compliance is the only guaranteed way to avoid the steep penalties and to support the government's broader objective of documenting the economy.