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A small-business owner sends proforma invoices for advance payment and is unsure whether they count as tax invoices or belong in the books.
A proforma is a quote with estimated tax. It creates no GST liability and no ITC. A tax invoice under Section 31 and Rule 46 is issued when the supply takes place.
Use a separate PI series, a clear Proforma Invoice heading, a validity date and estimated tax, and keep proformas out of the sales and purchase registers.
Proformas guide the buyer's payment, tax invoices drive GST, and neither register carries unmatched proforma entries.
A proforma invoice is a quote dressed as an invoice. You send it before delivery or before payment so the buyer knows the price, the tax and the terms. It is not a tax invoice: it creates no GST liability for you and gives the buyer no input tax credit (ITC). When the goods leave or the service is done, you issue a proper tax invoice and the proforma becomes history.
Buyers often ask for one to raise a purchase order, open a letter of credit or approve an advance. That is its whole job.
What should a proforma invoice show?
| Include | Why |
|---|---|
| A clear heading: “Proforma Invoice” | So nobody treats it as a tax invoice |
| Your name, address and GSTIN | Identifies the supplier |
| Buyer’s name, address and GSTIN | Lets the buyer route it for approval |
| Proforma number from a separate series (PI/26/001) | Keeps tax invoice numbers consecutive |
| Date and validity (for example, valid 15 days) | Prices and stock can change |
| Items, quantity, rate and HSN or SAC | Same detail the tax invoice will carry |
| Estimated GST at the applicable rate | Buyer can budget the full outflow |
| Payment terms and bank details | Advance or on delivery |
Leave out: your tax invoice number series, any IRN or QR code, and the words “Tax Invoice”.
How is a proforma invoice different from a tax invoice?
| Point | Proforma invoice | Tax invoice |
|---|---|---|
| Legal basis | None in GST law; a commercial document | Section 31 of the CGST Act and Rule 46 |
| GST liability | None | Yes, reported in GSTR-1 and paid in GSTR-3B |
| Buyer’s ITC | None | Yes, once it appears in GSTR-2B |
| Number series | Separate PI series | Consecutive tax series, up to 16 characters |
| E-invoice (IRN) | Never | Required if your turnover exceeds ₹5 crore |
When must the proforma be replaced by a tax invoice?
Under Section 31, a tax invoice for goods is issued before or at the time of removal or delivery. For services it is issued within 30 days of supplying the service (45 days for banks and similar institutions). An advance against a service also creates a GST point, which is handled with a receipt voucher, not the proforma.
Worked example: ₹2,36,000 proforma
A machine-parts supplier in Coimbatore sends proforma PI/26/031 for ₹2,00,000 of parts plus estimated GST at 18 percent:
- Taxable value: ₹2,00,000
- GST at 18 percent: ₹36,000
- Total: ₹2,36,000
The buyer pays the full amount in advance. On dispatch a week later, the supplier issues tax invoice INV/26/0184 for the same ₹2,36,000. Here is how the books should look:
| Record | Proforma PI/26/031 | Tax invoice INV/26/0184 |
|---|---|---|
| Sales register | Not entered | ₹2,00,000 plus ₹36,000 GST |
| GSTR-1 | Not reported | Reported in that month |
| Buyer’s purchase register | Not entered | Entered, ITC of ₹36,000 |
| Customer ledger | Not entered | Invoice set against the ₹2,36,000 advance |
If the buyer’s accountant enters the proforma in the purchase register, it sits there unmatched, because no supplier ever reports a proforma in GSTR-1. Then the tax invoice arrives and the same purchase gets entered twice.
Key rules to remember
- An advance received for services is a GST point under Section 13 of the CGST Act, documented by a receipt voucher under Rule 50.
- E-invoicing applies to tax invoices once turnover exceeds ₹5 crore (since 1 August 2023), never to proformas.
- A buyer’s ITC on the real tax invoice must be claimed by 30 November following the financial year under Section 16(4).
What to read next
- Next in this series: What is a GST tax invoice, and what must it contain?
- Keeping documents in step: PO, GRN and invoice three-way matching and what is a three-way match
- Why stray entries show as unmatched: GSTR-2B vs purchase register reconciliation
- GST reconciliation software: GST inward matching is on the TransactIG roadmap.