Proforma Invoice vs Tax Invoice: Meaning, Format and GST

What is a proforma invoice?

A proforma invoice is a preliminary bill that a seller sends before a sale is final. It looks like an invoice — items, quantities, prices, taxes, total — but it records an offer, not a completed sale.

Businesses send one to:

• Ask for an advance before manufacturing or dispatching an order.
• Confirm price and terms on a large or custom order, so the buyer can approve it internally.
• Support a buyer’s paperwork — a purchase approval, a loan, or an import licence or letter of credit.
• Quote for export orders, where the buyer’s bank or customs broker asks for one.

You can create one now with the free proforma invoice generator.

Proforma invoice vs tax invoice

	Proforma invoice	Tax invoice
Issued	Before the sale	At the time of the sale
Purpose	Offer, confirmation, advance request	Records the sale and the tax charged
Defined in GST law	No	Yes — Section 31, Rule 46
Creates GST liability	No	Yes
Buyer can claim input tax credit	No	Yes
Valid for an e-way bill	No	Yes
Reported in GSTR-1	No	Yes
Can be revised freely	Yes	No — corrected with a credit or debit note

The short version: a proforma invoice is a promise, a tax invoice is a record.

Proforma invoice vs quotation

The two overlap, and many businesses use them interchangeably. The usual difference is timing and commitment:

• A quotation answers an enquiry: “this is what it would cost.” The buyer may compare it with others.
• A proforma invoice comes after the buyer has said yes in principle: “this is exactly what we will bill you, please pay the advance.”

A proforma invoice is usually more detailed and more binding — exact quantities, delivery dates, payment terms and bank details for the advance. See how to write a quotation for the earlier step.

What a proforma invoice should contain

Because GST law does not define a proforma invoice, there is no prescribed format. A useful one mirrors the tax invoice it will become:

1. The words “Proforma Invoice” at the top, clearly, so nobody mistakes it for a tax invoice.
2. A proforma number and date, from a series of its own.
3. Your name, address and GSTIN.
4. The buyer’s name, address and GSTIN.
5. Item description, HSN or SAC code, quantity and unit price.
6. Discounts, the taxable value, and the GST rate and amount that will apply.
7. Total amount.
8. Validity — the date until which the prices hold.
9. Payment terms — the advance required and the balance terms.
10. Delivery terms and expected dispatch date.
11. Bank account and UPI details for the advance.

Keep a separate number series

If proforma invoices share the number series of your tax invoices, every proforma that never becomes a sale leaves a gap in the series that Rule 46 expects to be consecutive. Use a prefix of their own, such as PI-.

GST and the advance payment

The proforma invoice itself creates no tax. The advance paid against it may:

• Goods: most registered suppliers pay no GST on an advance for goods. The tax is due when the tax invoice is issued.
• Services: GST is due on the advance when you receive it. Issue a receipt voucher under Rule 50 and pay the tax on it in that month’s return. When the final invoice is raised, the tax already paid is adjusted.

The payment receipt and receipt voucher guide explains the voucher and its fields.

Common mistakes

• Calling it just “Invoice”. Without the word “Proforma”, the buyer may book it and try to claim credit.
• Dispatching goods on it. It is not a valid document for transporting goods or for an e-way bill.
• Sharing the tax invoice number series.
• No validity date. If the price of raw material rises, an open-ended proforma is hard to walk back.
• Forgetting the receipt voucher for an advance on services.

How VyapRise handles proforma invoices

In VyapRise, a proforma invoice is its own document with its own PI- number series, kept apart from your tax invoices. When the buyer confirms, it converts into a sales order, a delivery challan or a tax invoice with the items carried over, so nothing is typed twice and your tax invoice numbering is untouched. Proforma invoices are part of the Pro plan (a yearly plan) and open during the free trial.

For a single proforma invoice without an account, use the free proforma invoice generator.