Glossary
What is a proforma invoice?
What a proforma invoice is, how it differs from a tax invoice under GST, and what a small business can send instead.
Updated
In short
A proforma invoice is a preliminary bill sent before a sale, showing items, prices, GST and total so the buyer can approve or pay. SimpleERP has no proforma document; a quotation does the same job.
A proforma invoice is a preliminary bill a seller sends before the sale, showing the items, quantities, prices, GST and total the buyer will pay. It is not a tax invoice: it creates no GST liability, no sale in the books and no amount owed. Buyers use it to arrange payment, release an advance or get internal or bank approval before the goods are supplied.
Proforma invoice: a worked example
Ravi Stores wants 10 office chairs from Lakshmi Steel Furnitures and needs a priced document to release a 50% advance. Lakshmi Steel sends this, marked as a proforma or as a quotation:
| Item | Qty | Rate | Amount |
|---|---|---|---|
| Office chair mesh (HSN 9401) | 10 | ₹6,450 | ₹64,500 |
| CGST 9% | ₹5,805 | ||
| SGST 9% | ₹5,805 | ||
| Total | ₹76,110 | ||
| Advance requested (50%) | ₹38,055 |
Is a proforma invoice valid for GST?
No. Under GST the document that records a taxable supply is the tax invoice. A proforma invoice is an offer, so it takes no number in the GST invoice series, is not reported in GSTR-1 and gives the buyer no input tax credit. If the buyer pays an advance against it, the advance follows the GST rules for advances, which differ for goods and services.
FAQ
Questions, answered
What is the difference between a proforma invoice and a tax invoice?
A proforma invoice comes before the sale and only states what the buyer will pay. A tax invoice is issued when goods or services are supplied, carries a number in your GST series, is reported in GSTR-1 and records the sale, the GST and the amount the customer owes.
Can I claim input tax credit on a proforma invoice?
No. Input tax credit needs a tax invoice or a debit note issued by a registered supplier and reported by them. A proforma invoice is not a tax document, so a buyer should wait for the tax invoice before claiming the GST on it.
Is a quotation the same as a proforma invoice?
They carry the same information: items, rates, GST and total. A quotation is usually sent earlier, while the buyer is still deciding, and a proforma invoice once they have agreed and need a bill-like document to pay against. Many small businesses use one document for both.
Does a proforma invoice need a number?
It is good practice to number proforma invoices so you can refer to them, but use a separate series from your tax invoices. Mixing them would leave gaps or duplicates in the GST invoice series that your returns have to explain.
Related
Keep reading
Quotation
A priced offer sent before a sale, with items, rates, GST, total and the date the prices hold until.
Read moreTax invoice
The document a GST-registered business issues for a taxable sale, with the mandatory GST fields.
Read moreQuotation format
A quotation format with GST shown line by line, as a free Excel, Word and PDF download.
Read more
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