Fake & Flying Invoices in 2026: Input Tax Denial, Invoice-Value Penalties and the Public Register
Pakistan's 2026 framework attacks fake and flying invoices from both sides: sellers face a penalty equal to the invoice value and a public register of simulated invoice issuers, while buyers lose input tax on invoices from fictitious suppliers. How to protect your input-tax credit.
What fake and flying invoices are
A fake (or simulated) invoice records a sale that never happened; a flying invoice is a genuine-looking invoice traded between businesses so a buyer can claim input tax on purchases it never made. Both inflate input-tax claims and have long been a leading source of sales tax fraud in Pakistan.
FBR's countermeasures have tightened every year: SRO 350(I)/2024 made a buyer's return provisional until the seller files theirs, real-time Digital Invoicing made every invoice visible to FBR at issuance, and the Finance Act 2026 adds direct financial consequences on both sides of a fake transaction.
The 2026 measures: register, denial, invoice-value penalty
Finance Act 2026 reporting describes three headline anti-fraud measures: a public register of simulated invoice issuers, denial of input tax credit for dealings with fictitious suppliers, and a penalty equivalent to the full value of a fake invoice issued. A business named on the register is effectively cut off — registered buyers cannot afford to transact with it.
The practical consequence for every buyer: input tax is only as safe as your supplier. If a supplier turns out to be fictitious or non-filing, the credit you claimed on their invoices is exposed, even if you paid in good faith.
How buyers protect their input tax
Prefer suppliers who issue FBR-verified electronic invoices. An invoice posted through Digital Invoicing carries a valid Invoice Reference Number (IRN) and Version 2.0 QR code you can verify instantly — scan the QR (including in the Tax Asaan app), check the invoice number on FBR's verification portal, or SMS the details to 9966. Only IRN-carrying invoices are eligible for input-tax adjustment.
Check supplier status before large transactions: active status on the Active Taxpayer List, a valid STRN, and — once operational — absence from the simulated-issuer register. A minute of verification protects a credit that can run into millions.
How sellers stay clearly on the right side
For a genuine seller, the defence is the system itself: issue every sales tax invoice through Digital Invoicing so FBR sees it in real time with a valid IRN. Your buyers keep their input tax, your Annexure-C auto-populates from posted invoices, and there is no gap between what you issued and what FBR holds.
Digi Invoice validates each invoice against the DI v1.12 rules before posting and stores every IRN and QR code in an audit-ready ledger — so if a buyer, auditor or FBR officer ever asks, the verifiable record is one search away.