E-Invoicing in Pakistan: Regulations, Challenges, and Opportunities

E-invoicing is a rapidly expanding technology. Whereas Latin America and many European and Asian countries are already advanced in this field, a vast majority of countries are still considering their standards and relevant regulations in this matter. Pakistan is one such nation.

Nevertheless, Pakistan has started showing interest by introducing new e-invoicing requirements to modernize transaction controls.

Introducing e-invoicing requirements to modernize transaction controls will help registered buyers and integrated suppliers in Pakistan increase efficiency, cut costs, and fight fraud within their businesses locally and internationally.

Therefore, if your company is doing business in Pakistan and worldwide, you must understand the dynamics of the e-invoicing process to guarantee interoperability since many of these nations have made e-invoicing mandatory.

To help businesses understand the nuances of e-invoicing in Pakistan, we have prepared this guide to provide you with essential information concerning the regulations, challenges, and opportunities of e-invoicing in the country.

Let’s dig in!

Is e-invoicing mandatory in Pakistan?

As we mentioned in the introduction, Pakistan has recently introduced new e-invoicing requirements as part of its efforts to modernize transaction controls. The Federal Board of Revenue (FBR) announced the changes on 10 November 2023.

Although the implementation date has not yet been announced, as of 12 December 2023, the FBR released a notification specifying importers, manufacturers, wholesalers (including dealers), and distributors of “fast-moving consumer goods” as the “prescribed persons” to issue and transmit electronic sales tax invoices.

Registered buyers who receive electronic notices from integrated suppliers must also integrate into the FRB’s new system.

You may also like: E-Invoicing Countries: Mandates for 2023 & Beyond.

What are the requirements for e-invoicing in Pakistan?

Following the amendments to the Sales Tax Rules introduced by the Federal Board of Revenue (FBR), businesses shall adhere to specific guidelines when implementing e-invoicing systems.

Here’s a breakdown of the essential requirements:

Prescribed persons will install an “e-invoicing system” provided by an FBR-licensed person.
Integrated suppliers will issue real-time, verifiable electronic sales tax invoices for every taxable supply following the information required under section 23 of the Sales Tax Act, 1990 (ST Act).
Integrated suppliers will permit physical and online remote access to the records, systems, logs, and documents maintained in electronic form as needed by the FBR’s prescribed officer.
Prescribed persons will face penalties for non-compliance with these rules. However, they may continue issuing paper invoices if the Commissioner of Inland Revenue permits them to do so.

The conditions mentioned above and requirements will also apply to registered buyers who receive electronic invoices from integrated suppliers.

Potential challenges in the adoption of e-invoicing in Pakistan

The road to adoption in Pakistan is still pretty new and comes with challenges. Here, we will discuss some potential challenges businesses can face in adopting e-invoicing in the country.

Lack of budget

The upfront cost of integrating an e-invoicing system into an ERP can be too high for some companies, mainly small-scale businesses, on a tight budget.

Even though some small and medium-sized businesses would want to implement electronic invoicing, the high initial and follow-up costs lock them out.

In addition, some organizations don’t even have an ERP system, while others find the investment required to upgrade their accounting systems far beyond their budgetary allocations.

Legal and regulatory challenges

While many countries encourage using electronic invoices, the entire e-invoicing phenomenon is still at its infant stage in Pakistan. As a result, legal frameworks to control the implementation of e-invoices are still at a developmental stage.

This means that most businesses in the country aren’t fully conversant with what they should do to ensure they comply with e-invoicing regulations.

Moreover, there’s a lack of transparency about the e-invoicing solutions available in the market. As a result, organizations aren’t sure of the best electronic invoicing offering for their business model.

Cost of implementation and maintenance

The old system of issuing and receiving invoices currently looks inexpensive for most business owners, even though it can translate into a lot of money, especially when you must send hundreds or thousands of paper invoices yearly.

On the other hand, the cost of implementing e-invoicing systems, including acquiring designated software and hardware, might be a significant financial burden for some businesses, notably smaller enterprises, making it harder for such companies to adopt the new system.

Lack of incentives for businesses to adopt e-invoicing

Countries like Singapore have successfully implemented nationwide e-invoicing initiatives thanks to the $200 e-invoicing registration grant.

Other nations like the United Kingdom have made it mandatory for suppliers to send government payment requests via e-invoicing.

Countries like Pakistan have zero incentives for organizations to adopt electronic invoices. The ripple effect is that companies and businesses in these nations have no urge to implement e-invoicing.

In fact, many enterprises are not even aware of the benefits of partnering with an e-invoice solution.

Technological compatibility issues

Transitioning to e-invoicing may pose challenges related to the compatibility of existing business systems with the designated e-invoicing platforms. Integrating new technology into established workflows can be a complex process.

Training required for stakeholders

Employees and stakeholders accustomed to traditional paper-based invoicing methods may resist the transition to e-invoicing. Overcoming this resistance requires effective change management strategies and comprehensive training programs.

Benefits of e-invoicing in Pakistan

Although the implementation date of e-invoicing in Pakistan is yet to be announced, here are the benefits of implementing e-invoicing in Pakistan:

Cost-effectiveness

The automation of the invoicing process results in significant cost savings. For instance, fees relating to processing, printing, delivery, storage, postage, administration, and paper copies have all been shown to decrease upon replacing traditional invoicing with e-invoicing.

Higher efficiency

Not having to rely on paper documents and postage and opting for a quick online delivery frees up a lot of time, which can be directed towards other, more productive tasks. In addition, e-invoices rarely get mixed up or lost in the mail, reducing associated customer complaints.

Faster payments

Sending and receiving e-invoices means no more mail-related delays. Receiving e-invoices on time also means they can be processed and paid promptly.

Improved accuracy

Before e-invoicing, the manual approach involved in invoicing meant possible data entry errors, like sales omission, purchase over-invoicing, and general tax submission errors. Such errors can often lead to invoices that will be rejected and re-issued.

This is a complicated and time-consuming process. However, the cutting-edge systems on which e-Invoicing relies greatly reduce the occurrence of such errors.

Sustainable and environmentally friendly

By reducing the sending of invoices in physical format, less paper is required, which means fewer trees are felled to make the papers used in paper invoices. With e-invoicing, this felling of trees is avoided, and the environment is protected and cared for.

Takeaway: Learn how to navigate the e-invoicing process in Pakistan

Implementing electronic invoicing in Pakistan is a transformative step towards modernizing the country’s financial processes.

As you can see, electronic invoicing offers many benefits, including reducing the cost of producing paper invoices, faster payment cycles, eliminating the chances of human errors peculiar to manual data entry, fraud detection and prevention, etc.

Organizations that want these benefits must adhere to Pakistan’s newly introduced e-invoicing requirements and adopt them when the implementation date is fully rolled out.

In this day and age, invoicing is not just a legal requirement; it’s a strategic imperative for businesses with their eyes set on the global market.

Now that the Pakistan government has introduced e-invoicing requirements in the country, it is wise for businesses to start preparing themselves for the full rollout of the new system.

As you prepare for this change, you can partner with an e-invoicing provider like Storecove to secure interoperability and connectivity.

We provide a safe, seamless, and secure electronic invoicing system solution so businesses like yours can use the correct sending and receiving infrastructure to comply with the Pakistan government’s legal demands.

Ready to join the thousands of businesses worldwide that have already embraced the future of invoicing? Contact us today for more information.

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