Proforma invoice format
A proforma invoice is a commitment to supply on stated terms, not a demand for payment of tax. It is used to get an advance, open a letter of credit or obtain a purchase order — and it carries no tax consequences at all, which is the whole point of it.
| Description | Qty | Rate | Amount |
|---|---|---|---|
| MS Angle 50×50×6 | 1,400 | 58.00 | 81,200.00 |
| Freight to Panipat | 1 | 6,400.00 | 6,400.00 |
- The words "Proforma Invoice" — clearly, so it is not mistaken for a tax invoice
- Your name, address and contact details
- The customer’s name and address
- A reference number and date
- Description, quantity and rate of what is being offered
- Estimated taxes, marked as estimated
- Validity period of the offer
- Payment and delivery terms
- A clear statement that it is not a tax invoice
What it is for
Getting an advance payment, opening a letter of credit, obtaining a purchase order, or giving a customer something to take to their finance department. It commits you to terms; it does not record a supply.
Why it is not a tax invoice
No supply has happened, so no tax is due and no input credit arises. Marking the document clearly is what stops a customer’s accounts department booking it as a purchase, which happens more often than you would think.
What follows it
When the supply is made, a tax invoice is issued. If an advance was received against the proforma, the receipt and its adjustment against the eventual invoice both need recording.
Proforma invoice questions
Is a proforma invoice a legal document?
It is a binding offer on the terms stated, for the validity period stated, but it is not a tax document. No GST liability arises from it and no input credit can be claimed against it.
Can a customer claim input credit on a proforma invoice?
No. Only a valid tax invoice supports an input credit claim, which is why a proforma should say plainly on its face that it is not one.
What is the difference between a proforma invoice and a quotation?
In practice very little, and the two are often used interchangeably. A proforma is typically more formal and more specific — used where the buyer needs a document for an advance payment or a letter of credit.
Do I need to number proforma invoices?
Not under the GST rules, since they are not tax documents, but you should — you will want to trace which proforma became which order and which invoice.
Related
Turn a proforma into an order and an invoice
In tBiz the document becomes the next one without re-typing, against the same party ledger.