Proforma › Proforma or tax invoice

Proforma invoice vs tax invoice

The two look alike but do very different jobs. A proforma is a promise of what you will bill. A tax invoice is the bill itself, and the GST law attaches to it.

The difference at a glance

	Proforma invoice	Tax invoice
What it is	An offer in invoice form	The bill for a supply
GST payable because of it?	No	Yes, on the supply it records
Goes into GSTR-1?	No	Yes
Buyer can claim input tax credit on it?	No	Yes (if the other conditions are met)
Numbering	Your own series (PI/…)	One serial series per financial year, up to 16 characters
Accounting entry	None	Sale and amount due

When to send a proforma

• The buyer needs an approved price before paying or ordering.
• You want an advance before you buy material or start work.
• The buyer's bank, a government office or a lender asks for one (loans, subsidies, import paperwork).
• Exports: the overseas buyer often needs it to open a letter of credit or arrange an import permit.

When the tax invoice is needed

For goods, the tax invoice is issued when the goods are removed or delivered. For services, within 30 days of providing them. When an advance arrives for a service, GST is due on the advance, so you issue a receipt voucher for it (the receipt maker has an "Advance received" type). For goods, a regular registered business pays no GST on an advance; composition dealers follow a different rule, so they should check with their accountant.

From one to the other

Press Make invoice on a saved proforma. The invoice maker opens with the same buyer, items and rates, and writes "Proforma Invoice PI/26-27/004" as the order reference. You choose the invoice number and date there, check everything and save. The proforma is then marked "Invoice made".