No tax on factory to warehouse movements

ISLAMABAD: To curb harassment of taxpayers and streamline the movement of goods, the Federal Board of Revenue (FBR) has announced that transferring goods from a factory to a registered person’s own warehouse under the same Sales Tax Registration Number (STRN) would not be treated as a taxable supply.

As a result, inter-premises movement of goods also does not require the issuance of a digital invoice. However, consignments must be accompanied by a prescribed Stock Transfer Note (STN), clearly endorsed “Stock Transfer — Not a Taxable Supply”, in accordance with Sales Tax General Order No. 25 of 2026, issued on Monday.

Under Section 2(33) of the Sales Tax Act 1990, a ‘supply’ requires a change of ownership or consideration. Since goods moving between a factory and warehouse of the same registrant involve no sale, they fall outside the charge of sales tax. However, where the receiving warehouse holds a separate STRN, the movement will be treated as a taxable supply, mandating issuance of digital invoicing and output tax.

To prevent mischaracterisation during transit checks, the FBR has laid down detailed standard operating procedures (SOPs) governing the movement of goods between a factory and a registered person’s own warehouse, clarifying that such transfers are not taxable supplies.

Federal Board of Revenue stops harassment of goods carriers

As per SOPs, despatching units must generate a sequentially numbered Stock Transfer Note, endorsed prominently as “Stock Transfer — Not a Taxable Supply.” The value of goods is to be recorded strictly at cost for inventory control, without resembling a tax invoice.

The STN must accompany consignments at all times during transit and be produced on demand at any checkpost. Upon receipt, the warehouse manager must acknowledge the consignment and update the warehouse stock register, while the factory must correspondingly update its own records under Rule 22.

In case the receiving warehouse holds a separate STRN, the movement will be treated as a taxable supply. In such cases, the despatching unit must issue a digital invoice through the licensed integrator or PRAL, account for output tax, and reflect the transaction in the sales tax return. The STN procedure cannot substitute for invoicing in these circumstances.

The order further instructs field formations not to treat an STN as noncompliance when both premises share the same STRN. Conversely, any consignment moving without either a tax invoice or a STN will be deemed prima facie undocumented and proceeded against under the law.

The order also directs field formations to avoid unnecessary harassment. Officers are barred from demanding CNICs of drivers or detaining vehicles without proper cause. Goods in transit are not to be physically checked or unloaded, except for items listed in the Third Schedule, which may be inspected solely to verify retail price embossing.

“Harassment of taxpayers, in any form or manner, is highly objectionable and shall not be tolerated,” the directive warns, adding that any departure from these instructions will be viewed seriously.

Published in Dawn, September 29th, 2026