GST Registration
GST Return
Quick & Easy Process
Professional Guidance
Legal and Tax Benefits
A pro forma is a document made before the actual sale of goods or services. This document is issued by the retailer or supplier to the customer or buyer who is enquiring about the goods or services. It is issued before the issue of a commercial invoice or tax invoice. This guide will help you understand pro forma invoices under GST, their meaning, template, uses, etc.
A proforma invoice is an early version of a bill that follows a GST-compliant format. Sellers send it to buyers as a preview before delivering goods or services. Similar to a shopping list, it includes details like product descriptions, estimated costs, and key terms.
Proforma invoices play a vital role in businesses by ensuring both parties agree on what’s being sold and at what price. They help avoid misunderstandings, plan transactions, and maintain transparency, especially in international trade. Under GST, proforma invoices assist businesses in complying with regulations, providing estimates before the final transaction, and serving as a ‘before’ snapshot for planning and budgeting.
In addition to those stated in the previous section, like estimated sales quantity, price, costs, and commissions, etc, a proforma invoice must have the following particulars :
Other information that a seller thinks he or she requires to inform to the ultimate buyer can be added.
A pro forma is required when a customer requests the buyer to give information regarding the goods or service that is yet to be delivered. It is a preliminary price quotation as well as additional details of a specific product or service before its actual sale. This document is mainly used for the purpose of exports or imports for smooth delivery.
Some of the benefits and uses of pro-forma invoices are listed below -
Here are the common mistakes that you should avoid while making a proforma invoice -
The format of the Pro Forma invoice is not prescribed in any guidelines. It may look like a commercial invoice. The label on the document should be clearly stated as pro forma, so that it reflects that it is estimated and not the final tax invoice. A sample format has been created below for ready reference.
| Basis | Proforma Invoice | Purchase Order | Invoice | Estimates |
|---|---|---|---|---|
| Concept | It is a document issued by the supplier to the buyer providing information regarding the goods or services that are yet to be delivered. | It is a document that is sent to the supplier by the buyer which has the list of the goods or services that the buyer wants to purchase. | It is a commercial document issued by the supplier to the buyer containing details of the goods or services supplied to him or her and a notification that the payment is due. | It is a formal estimate of required goods or services and the total amount owed for the same. |
| Usage | It helps the buyer in taking decision whether to place an order or not. | It is used for placing an order of goods or services from the supplier. | It notifies the buyer that the payment is due. | It provides estimated sale price of the goods or services yet to be delivered. |
| Importance | It gives the customer a clear idea of what to expect from an order. | It helps businesses manage orders, budgets and set business expectations. | It enables businesses to receive money and updates incoming payments. | It provides detailed information on the offerings to the customers. |
| Issued when | It is issued before the delivery of the goods or services to the buyer. | It is issued after the receipt of the pro forma or quotation from the supplier. | It is issued before the payment is received by the supplier | It is issued on request of the buyer before the delivery of the goods or services. |
| Furnished to | It is issued to the buyer or customer | It is issued to the Supplier | It is issued to the buyer or customer | It is issued to the buyer or customer |
| Furnished by | It is raised by Supplier | It is raised by buyer or customer | It is raised by supplier | It is raised by supplier |
| Flexibility | It is Negotiable | It is not applicable | It is non-negotiable | It is negotiable |
| Consequence when accepted | It leads to Creation of sale. | It leads to contract of sale. | It leads to Confirmation of sale. | It also leads to Creation of sale. |
Don’t have enough time to take care of GST compliances or file your GST return? Don’t worry! Our experts are here to help you with GST filing, GST compliance, and the smallest of GST-related queries. Book an online CA Now!
Yes, the pro forma invoice is negotiable document. A buyer can negotiate on various details such as pricing, delivery time, shipping costs and so on.
The validity varies from business to business or industry to industry.
The pro forma invoice is issued by the supplier to the buyer for purchase approval process.
Businesses involved in all industries often use pro forma invoices to satisfy their internal purchasing-approval process
Businesses across various industries, such as manufacturing, import/export, trading, wholesale, and dealerships, often use pro forma invoices to streamline their internal purchasing approval processes.
Creating a pro forma invoice involves several key steps.
