Quick answer: a proforma invoice is a preliminary bill sent before the sale is final. It shows the buyer what they will pay, including expected GST, so they can approve a purchase, arrange an advance or open a letter of credit. It is not a GST document, creates no tax liability and cannot be used to claim input tax credit. The tax invoice is issued when the supply actually happens.
Where proforma invoices are used
- A buyer's purchase team needs a document to raise a payment request
- You want an advance before starting production
- An importer needs it to open a letter of credit or apply for a licence
- A government or corporate tender asks for a price document before the order
- Goods are sent as samples and the customer wants to see a commercial value
Beautiful GST invoices with your signature and stamp, quotations to credit notes, inventory, UPI collection and 30+ reports.
Start free See the demoProforma vs tax invoice vs quotation
| Quotation | Proforma invoice | Tax invoice | |
|---|---|---|---|
| Purpose | Offer a price | Confirm terms before supply | Record the actual supply |
| Sent when | Enquiry stage | After the buyer agrees in principle | At or before time of supply |
| GST liability | None | None | Yes |
| Buyer can claim ITC | No | No | Yes |
| Shown in GSTR-1 | No | No | Yes |
| Numbering | Quote series | Separate PI series | Invoice series, up to 16 characters |
| Can be revised | Freely | Usually, with a new version | Only through credit or debit notes |
What to put on a proforma invoice
- The words "Proforma Invoice" clearly at the top
- Your name, address and GSTIN
- PI number, date and validity (for example, valid for 15 days)
- Buyer's name, address and GSTIN
- Item description, HSN or SAC, quantity, unit price
- Taxable value, GST rate and expected GST amount
- Freight, packing and insurance, if charged
- Delivery timeline and place of supply
- Payment terms, such as 50% advance and balance before dispatch
- Bank details for the advance
- A line saying "This is not a tax invoice"
GST on advances: goods and services are treated differently
The GST question usually comes up when the buyer pays against the proforma.
| You supply | Advance received | What to issue |
|---|---|---|
| Goods | GST is generally not payable on advances for goods | Record the advance; issue a tax invoice at the time of supply |
| Services | GST is payable when the advance is received | Issue a receipt voucher with tax, then adjust it in the final invoice |
If the order is cancelled after a services advance, issue a refund voucher.
From proforma to tax invoice
The mistake to avoid is typing everything again. Convert the approved proforma into a tax invoice so that prices, quantities and buyer details match exactly what the customer approved. Then change only what really changed, such as a partial dispatch.
A typical flow in MizUp Finance:
- Create a quotation from the CRM deal.
- Convert it to a proforma invoice when the buyer agrees.
- Record the advance payment against the proforma.
- Convert to a tax invoice at dispatch. The advance is adjusted automatically.
Export proforma invoices
For exports, add the Incoterm (FOB, CIF and so on), currency, port of loading and discharge, country of origin, packing details and your IEC. Banks and buyers compare the proforma with the final commercial invoice, so keep descriptions identical.
Frequently asked questions
Is GST payable on a proforma invoice?
No. A proforma invoice is not a supply document, so it does not create GST liability. GST becomes payable when the time of supply arises and you issue the tax invoice, or receive an advance for services.
Can a buyer claim ITC on a proforma invoice?
No. Input tax credit needs a valid tax invoice or another prescribed document. A proforma invoice does not qualify.
Should a proforma invoice have a number?
Yes. Give it its own series, such as PI/26-27/001, so it is never confused with a tax invoice number.
Is a proforma invoice legally binding?
On its own it is an offer or a commitment of terms. Once the buyer accepts it in writing or pays against it, it can form part of the contract, so keep terms and validity clear.
