Proforma Invoice Under GST: Meaning, Format, Rules & Complete Guide (2026)
Quick Summary
- A proforma invoice is not a statutory GST invoice. It is a commercial estimate shared before the final sale or supply.
- Issuing a proforma invoice does not create GST liability.
- A proforma invoice cannot be used for GST return filing, e-invoicing, or Input Tax Credit claims.
- GSTIN, HSN/SAC codes, place of supply, and estimated GST breakup are not legally mandatory on a proforma invoice, but they are strongly recommended for smoother conversion into a GST tax invoice.
- A buyer cannot claim Input Tax Credit on the basis of a proforma invoice. ITC can be claimed only on valid GST documents such as a tax invoice, debit note, bill of entry, or other prescribed documents.
- A proforma invoice is not uploaded to the Invoice Registration Portal and does not require an IRN or QR code.
- If advance payment is received against a proforma invoice, GST treatment depends on whether the supply is for goods or services.
- For goods, GST is generally not payable on advance received. For services, GST may become payable on receipt of advance as per time-of-supply rules.
- Proforma invoices are not reported in GSTR-1, GSTR-3B, GSTR-2A/2B, or GSTR-9. However, taxable advances for services may need separate reporting as advance receipts, wherever applicable.
This guide explains exactly what a proforma invoice is, how it works under GST, when to use it, what it must contain, how it differs from a tax invoice, quotation, purchase order, and commercial invoice.
What is a Proforma Invoice?
A proforma invoice is a preliminary document sent by a seller to a buyer before the final sale takes place. It shows the expected details of a proposed transaction, such as goods or services, quantity, rate, estimated tax, delivery terms, payment terms, and validity period.
It is not the same as a GST tax invoice. A proforma invoice does not confirm that supply has taken place, does not create GST liability by itself, and cannot be used by the buyer to claim Input Tax Credit.
The term “proforma” comes from the Latin phrase “proforma,” meaning “for the sake of form.” In business, it is used as a formal estimate or pre-sale document. It helps the buyer review the cost, take internal approval, arrange funds, issue a purchase order, or open a Letter of Credit in export transactions.
Under GST, there is no separate prescribed format for a proforma invoice. However, using a GST-ready format with GSTIN, HSN/SAC codes, place of supply, estimated tax breakup, and clear terms helps avoid errors when the final tax invoice is issued.
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Purpose and Status of Proforma Invoice Under GST
A proforma invoice is used before the actual sale or supply happens. It gives the buyer a clear estimate of the proposed transaction, but does not work as a statutory GST invoice.
It is important to understand this difference because many businesses mistakenly treat a proforma invoice like a tax invoice. Under GST, only a valid tax invoice or other prescribed GST document can be used for return filing and Input Tax Credit .
Purpose of a Proforma Invoice
- Inform the buyer about the proposed goods or services
- Share an estimated price before the order is confirmed
- Mention estimated GST, freight, packing, insurance, or other charges
- Help the buyer take internal approval
- Support purchase order creation
- Request an advance payment if commercially agreed
- Support export documentation, bank processing, import permits, or Letter of Credit procedures
- Provide a base for issuing the final GST tax invoice later
GST Status of a Proforma Invoice
- A proforma invoice is not a tax invoice under GST.
- It is not reported in GST returns.
- It does not allow the buyer to claim ITC.
- It does not require e-invoicing or IRP upload.
- It does not create GST liability simply because it has been issued.
However, if an advance payment is received against a proforma invoice, the GST treatment must be checked separately based on whether the supply is for goods or services.
Features of a GST-Ready Proforma Invoice
A proforma invoice should be prepared carefully because it often becomes the base for the final tax invoice. A good GST-ready proforma invoice should include the following details:
Clear Document Label
The document should clearly mention “Proforma Invoice” at the top. This avoids confusion with a tax invoice. You can also add a note such as: “This is not a tax invoice and cannot be used for GST Input Tax Credit.”
Supplier Details
Include the seller’s business name, address, contact details, and GSTIN if registered under GST. GSTIN is not legally mandatory on a proforma invoice, but it is recommended because it helps match the details with the final GST invoice.
Buyer Details
Mention the buyer’s name, address, contact details, and GSTIN if the buyer is GST-registered. This is especially useful in B2B transactions because the final tax invoice must carry accurate buyer details.
4. HSN/SAC Code
Mention HSN codes for goods and SAC codes for services wherever possible. These are not mandatory for a proforma invoice, but they help avoid wrong tax classification when the final GST invoice is issued.
5. Description of Goods or Services
The description should be clear enough for the buyer to understand what is being offered. For goods, mention product name, model, SKU, quantity, unit, and rate. Whereas, for services, mention service description, scope, billing period, milestones, or deliverables.
6. Estimated Tax Breakup
The proforma invoice may show an estimated GST breakup as CGST + SGST or IGST, depending on the proposed place of supply . But note that this is only an estimate. GST becomes payable only as per the applicable time-of-supply rules, not merely because the proforma invoice shows tax.
7. Terms of Sale and Payment
Mention payment terms, delivery timelines, advance requirements, freight charges, installation charges, discount terms, and any other commercial conditions. This helps avoid disputes after the buyer confirms the order.
8. Validity Period
A proforma invoice should clearly state how long the quoted price and terms are valid. For example: “Valid for 30 days from the date of issue.”
Note that the GST law does not prescribe any validity period for proforma invoices. It's up to the business to decide it based on pricing, industry practice, and cost fluctuations.
9. Export or Customs Details
For export transactions , the proforma invoice may include currency, incoterms, country of destination, port details, HS code, bank details, and shipment terms.
It may be used for buyer approval, bank documentation, import permits, or Letter of Credit processing. The final export documentation is normally based on the commercial invoice and shipping documents.
Pre-GST vs Post-GST: What Changed in Proforma Invoices?
Before GST, businesses used VAT, CST, and Service Tax details depending on the nature and location of the transaction. After GST, the format became more uniform because GSTIN, HSN/SAC classification, place of supply, and CGST/SGST/IGST breakup became important for final invoicing.
| Parameter | Pre-GST Era | Post-GST Era |
|---|---|---|
| Tax registration number | VAT/CST/Service Tax number | GSTIN |
| Tax classification | VAT, CST, Service Tax | CGST + SGST or IGST |
| Goods classification | Varied by state | HSN code |
| Service classification | Service category | SAC code |
| Place of supply | Not always standardised | Important for tax type |
| Inter-state tax | CST | IGST |
| Tax breakup | Often shown as a single tax amount | Usually shown as CGST + SGST or IGST |
A proforma invoice is not a GST document, but using GST-ready details makes it easier to convert it into a proper GST tax invoice later.
When Is a Proforma Invoice Used?
A proforma invoice is used before the final sale is completed. It is useful when the buyer needs estimated pricing, approval, documentation, or payment terms before confirming the order. Common situations include:
1. Buyer Approval Before Purchase
A buyer may request a proforma invoice before issuing a purchase order. This helps the buyer’s finance or procurement team approve the cost.
2. Advance Payment Request
A seller may issue a proforma invoice when the buyer has to pay an advance before production, delivery, or service commencement.
The advance should be recorded separately. If GST applies on the advance, the seller should issue the required receipt voucher and follow GST time-of-supply rules.
3. Export Transactions
Exporters often issue proforma invoices to overseas buyers for price confirmation, Letter of Credit opening, import permits, or bank processing. The final export invoice is issued later when the supply is made.
4. Custom Manufacturing Orders
In manufacturing, a proforma invoice helps confirm product specifications, quantity, price, tax estimate, and delivery terms before production begins.
5. Government Tenders and B2B Procurement
In tenders and large B2B purchases, buyers often require a proforma invoice or detailed price estimate before issuing the final order.
6. Service Contracts
For services, a proforma invoice can define the expected scope, project fee, billing milestone, advance requirement, and payment terms before the final invoice is raised.
Real-World Use Cases
Case 1: Domestic Supply from Manufacturer to Dealer
Rajesh runs a fan manufacturing unit in Pune. A dealer in Bengaluru wants to buy 100 units but needs a GST-inclusive estimate before placing the order. Rajesh issues a proforma invoice with the following details:
100 fans x ₹2,500 = ₹2,50,000
Estimated IGST @ 18% = ₹45,000
Estimated total = ₹2,95,000
The dealer uses this document for internal approval and then issues a purchase order. If the dealer pays an advance, Rajesh records it as advance received. Since the supply is for goods, GST is generally not payable on the advance. GST is handled when the actual tax invoice is issued as per the applicable time-of-supply rules .
Case 2: Service Provider Receiving Advance
An IT consultant sends a proforma invoice to a client for a software implementation project worth ₹2,00,000 plus GST. The client agrees and pays 50% advance before the work starts.
Here, the proforma invoice itself does not create a GST liability. However, because the transaction is for services, GST may be payable upon receipt of the advance. The consultant should issue a receipt voucher and report the advance as required under GST.
Case 3: Exporter to Overseas Buyer
Priya runs a textile export business in Surat. A UK buyer asks for a proforma invoice to open a Letter of Credit.
Priya issues a proforma invoice in USD, mentioning product description, HS code, quantity, FOB value, port details, payment terms, and shipment timeline.
After the order is confirmed and goods are shipped, Priya issues the final export invoice and prepares the required shipping documents. The export supply is treated as zero-rated under GST , subject to the applicable export conditions and documentation.
Contents of a Proforma Invoice Under GST
A proforma invoice should include the following essential details mentioned in the table below. These details help ensure transparency and accuracy in business transactions under the GST system. A properly prepared proforma invoice also helps buyers understand the estimated cost, taxes, and terms before the final invoice is used.
| Field | Details |
|---|---|
| Document label | Clearly mention “Proforma Invoice” |
| Proforma number | Use a unique reference number for tracking |
| Date of issue | Date on which the proforma invoice is prepared |
| Supplier name and address | Legal or trade name and address of the seller |
| Supplier GSTIN | Recommended if seller is GST-registered |
| Buyer name and address | Name and address of the proposed buyer |
| Buyer GSTIN | Recommended if buyer is GST-registered |
| Description | Goods or services being offered |
| HSN/SAC code | Recommended for correct tax classification |
| Quantity/unit | Quantity for goods or scope/unit for services |
| Rate | Proposed price per unit |
| Discount | Any proposed discount, if applicable |
| Taxable value | Estimated value before GST |
| Estimated GST | CGST + SGST or IGST, as applicable |
| Place of supply | State or location relevant for GST treatment |
| Freight/packing/insurance | Additional charges, if applicable |
| Total estimated amount | Final estimated amount payable |
| Payment terms | Advance, credit period, payment mode |
| Delivery terms | Dispatch timeline, freight terms, delivery location |
| Validity period | Time period for which the quotation is valid |
| Notes | Mention that it is not a tax invoice |
| Authorised signature | Signature or approval from seller |
Validity Period of a Proforma Invoice
The seller can decide the validity of proforma invoice based on business practice, market conditions, product type, and price sensitivity.
| Industry | Common Validity Period |
|---|---|
| Manufacturing and trading | 15 to 30 days |
| Construction and real estate | 30 to 60 days |
| Export transactions | 30 to 90 days |
| IT and software services | 30 days |
| Commodities and price-sensitive goods | 7 to 15 days |
A validity period should always be mentioned clearly, such as this proforma invoice is valid for 30 days from the date of issue.” Without it, the buyer may assume that the quoted price remains open for a long time. This can create disputes if raw material prices, exchange rates, freight costs, or tax treatment change before the final order is confirmed.
How Do Proforma Invoices Work Under GST?
Under GST, a proforma invoice works as a pre-sale estimate. It helps the buyer understand the expected value and terms before confirming the order.
- Buyer enquiry- The buyer asks for price, quantity, tax estimate, delivery timeline, or service scope.
- Seller issues proforma invoice- The seller prepares a proforma invoice with estimated value, proposed GST breakup, payment terms, and validity period. No GST liability arises merely because the proforma invoice is issued.
- Buyer reviews and confirms- The buyer may approve, negotiate, reject, or ask for changes.
- Advance Payment (if any)- If advance is received, the seller should record it as advance received . For goods, GST is generally not payable on advances. For services, GST may become payable on receipt of advance as per time-of-supply rules.
- Supply is made- The seller dispatches goods or provides services as agreed.
- GST Tax invoice issued-The seller issues the final GST tax invoice as per Section 31 and applicable GST rules. This is the document used for GST reporting, e-invoicing where applicable, and ITC claims by the buyer.
GST on Advance Payment Against a Proforma Invoice
This is one of the most important areas where businesses make mistakes. A proforma invoice itself does not create GST liability. However, if the buyer makes an advance payment against the proforma invoice, the GST treatment depends on the nature of supply.
Advance Received for Goods
For supply of goods , GST is generally not payable at the time of receiving advance. The GST liability normally arises when the tax invoice is issued or when the invoice is required to be issued as per GST rules.
Example: A furniture manufacturer issues a proforma invoice for ₹1,00,000 plus GST. The buyer pays ₹20,000 advance. Since the transaction is for goods, GST is generally not payable only because the advance was received. GST will be handled when the final tax invoice is issued.
Advance Received for Services
For services, GST may become payable when advance payment is received. This is because time-of-supply rules for services can trigger GST on the earlier of invoice issuance or receipt of payment, subject to the applicable conditions.
Example: A consultant issues a proforma invoice for ₹1,00,000 plus GST and receives ₹50,000 advance.
Since the transaction is for services, GST may become payable on the advance amount received. The consultant should issue a receipt voucher and report the tax as applicable.
Receipt Voucher Requirement
When a registered person receives advance payment for a supply, a receipt voucher or other prescribed document should be issued. If no supply is made later and no tax invoice is issued, a refund voucher may be required when the advance is refunded.
Accounting Treatment of a Proforma Invoice
A proforma invoice is not recorded as income, expense, receivable, or payable in the books of accounts. This is because it is only a preliminary document. It does not confirm that supply has taken place, and it does not create a final financial obligation by itself.
- Seller's books: No income is recognised; no accounts receivable entry is passed. No GST output liability is recorded only because a proforma invoice has been issued.
- Buyer's books: No expense is recognised; no accounts payable entry is passed. No ITC is claimed either
If Advance Is Received
If the seller receives an advance, it should be recorded as advance received or liability, not as revenue. Revenue is recognised only when the supply is made and the actual invoice is issued as per accounting and tax requirements.
E-Invoice and IRP Applicability for Proforma Invoices
A proforma invoice is outside the scope of GST e-invoicing. It does not need to be:
- Uploaded to the Invoice Registration Portal
- Assigned an Invoice Reference Number
- Signed by the IRP
- Generated with a IRP signed QR code under e-invoicing
E-invoicing applies to notified GST documents such as tax invoices, credit notes, and debit notes issued by applicable taxpayers. It does not apply to proforma invoices because a proforma invoice is not a GST tax invoice.
E-Invoice Position in 2026
E-invoicing is applicable to taxpayers whose aggregate annual turnover exceeds ₹5 crore, subject to the applicable rules and notified categories.
From 1 April 2025, taxpayers with AATO of ₹10 crore and above are not allowed to report e-invoices older than 30 days from the date of the document. This restriction applies to documents for which IRN is required, such as invoices, credit notes, and debit notes.
This 30-day rule does not apply to proforma invoices because they are not uploaded to the IRP.
| Document | IRP Upload Required? |
|---|---|
| GST tax invoice, where e-invoicing applies | Yes |
| Debit note, where e-invoicing applies | Yes |
| Credit note, where e-invoicing applies | Yes |
| Proforma invoice | No |
| Quotation | No |
| Purchase order | No |
| Receipt voucher | No |
BUSY accounting software helps businesses generate GST invoices, e-invoices, and IRN with QR code for applicable transactions, without manually switching between multiple systems.
GST Return Reporting of Proforma Invoices
A proforma invoice is not reported in GST returns because it is not a GST invoice. Only the actual GST tax invoice is reported in GST returns .
| GST Return | Is Proforma Invoice Reported? |
|---|---|
| GSTR-1 | No |
| GSTR-2A/2B | No |
| GSTR-3B | No |
| GSTR-9 | No |
Note: If advance is received for services and GST becomes payable on that advance, the taxable advance may need to be reported separately as per GST return requirements. In such cases, the reporting is linked to the advance receipt and tax liability, not to the proforma invoice itself.
Proforma Invoice vs. Tax Invoice
| Parameter | Proforma Invoice | Tax Invoice |
|---|---|---|
| Meaning | Preliminary estimate before final supply | Statutory GST invoice for actual supply |
| GST status | Not a GST invoice | Valid GST document |
| Issued when | Before sale confirmation or supply | At the time prescribed under GST law |
| GST liability | Does not create GST liability by itself | Used for GST reporting and tax compliance |
| ITC eligibility | ITC cannot be claimed | ITC may be claimed if conditions are satisfied |
| GST return reporting | Not reported | Reported in GST returns |
| E-invoicing | Not applicable | Applicable if supplier crosses the notified threshold |
| Books of accounts | Not recorded as sale or purchase | Recorded in books |
| Purpose | Estimate, approval, advance request, documentation | Final billing and GST compliance |
| Binding nature | Commercial proposal or estimate | Formal invoice for supply |
Proforma Invoice vs. Quotation vs. Purchase Order
A proforma invoice, quotation, and purchase order are often used in the same transaction cycle, but they are not the same.
- Proforma Invoice: Issued by the seller before the final invoice. It gives a detailed estimate of price, quantity, tax, delivery terms, and payment terms.
- Quotation: Issued by the seller as a price offer. It may be less detailed than a proforma invoice and may not include full tax breakup or delivery terms.
- Purchase Order: Issued by the buyer after accepting the seller’s offer. It confirms the buyer’s intent to purchase and authorises the seller to proceed.
| Document | Issued By | Purpose | Tax Details | GST Document? |
|---|---|---|---|---|
| Proforma invoice | Seller | Detailed estimate before sale | Usually estimated | No |
| Quotation | Seller | Price offer | May or may not include | No |
| Purchase order | Buyer | Order confirmation | May mention estimated tax | No |
| Tax invoice | Seller | Final billing for supply | Actual GST details | Yes |
Proforma Invoice vs. Commercial Invoice
This difference is especially important in export and import transactions.
| Parameter | Proforma Invoice | Commercial Invoice |
|---|---|---|
| Timing | Before final sale or shipment | After sale or at shipment stage |
| Purpose | Buyer approval, bank processing, import permit, LC opening | Final export billing, customs, and payment documentation |
| Payment status | Estimate or request for advance | Final payment document |
| GST treatment | No GST liability by itself | GST treatment depends on actual supply |
| Customs use | Used for preliminary documentation | Used for final customs and shipment documentation |
| ITC eligibility | Not eligible | Eligible for domestic supplies if GST conditions are met |
In export trade, the proforma invoice is commonly used before the deal is finalised. The commercial invoice is used once the transaction moves to actual shipment and final documentation.
Amendment and Cancellation of a Proforma Invoice
There are no statutory GST rules for amending or cancelling a proforma invoice because it is not a GST invoice. It is managed as a commercial document.
When to amend a proforma invoice:
- Price changes before order confirmation
- Quantity is revised after negotiation
- GST rate estimate needs correction
- Buyer’s GSTIN or address changes
- Delivery terms are updated
- Foreign exchange rate changes in export transactions
How to amend: Issue a revised proforma invoice with a new reference number. Mention clearly: “This document supersedes Proforma Invoice No. [number] dated [date].” Keep both versions in your records for tracking.
When to cancel:
- Buyer declines the offer
- Order is not confirmed
- Validity period expires
- Commercial terms change completely
- Deal is cancelled before supply
No GST reversal is required only because a proforma invoice is cancelled, since no GST liability was created by issuing it. However, if advance was received and tax was paid on that advance, the refund or adjustment should be handled as per applicable GST rules.
Common Mistakes to Avoid in Proforma Invoices
Here are the typical errors businesses make when preparing proforma invoices:
1. Treating It Like a Tax Invoice
A proforma invoice should not be treated as a tax invoice. It cannot be used for GST filing, ITC claims , or e-invoicing.
2. Not Labelling It Clearly
Always mention “Proforma Invoice” clearly at the top. Also add a note that it is not a tax invoice.
3. Calling GSTIN and HSN/SAC Mandatory
GSTIN and HSN/SAC are not legally mandatory on a proforma invoice. But they should be included as a best practice because they help prepare the final GST invoice correctly.
4. Claiming ITC on a Proforma Invoice
A buyer cannot claim ITC on the basis of a proforma invoice. ITC requires a valid GST document and satisfaction of GST conditions.
5. Not Handling Advance Correctly
Do not assume that advance payment has the same GST treatment in every case. Goods and services are treated differently under GST.
6. Uploading Proforma Invoice to IRP
A proforma invoice should not be uploaded to the IRP. E-invoicing applies only to notified GST documents such as tax invoices, debit notes , and credit notes.
7. Recording It as Sales or Purchase
A proforma invoice should not be recorded as sales by the seller or purchase by the buyer. Accounting entries are made only when advance is received, supply happens, or the actual invoice is issued.
8. Leaving Validity Open-Ended
Always mention validity. This protects the seller if price, tax rate, freight, or exchange rate changes before the order is confirmed.
9. Showing Wrong Tax Type
If estimated GST is shown, ensure the correct tax type is used. For intra-state supply, CGST + SGST may apply. For inter-state supply, IGST may apply.
10. Using the Same Numbering as Tax Invoices
Maintain a separate numbering series for proforma invoices. Do not mix proforma invoice numbers with GST tax invoice numbers.
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Conclusion
A proforma invoice under GST is a useful commercial document for sharing estimated prices, getting buyer approval, requesting advances, and supporting export or bank documentation. But it is not a statutory GST invoice.
Issuing a proforma invoice does not create GST liability by itself. It is not reported in GST returns, cannot be used for ITC claims, and does not require e-invoicing or IRP upload.
The safest approach is to treat a proforma invoice as a GST-ready estimate. Include GSTIN, HSN/SAC codes, place of supply, estimated tax breakup, payment terms, delivery terms, and validity period so that it can be converted into a proper GST tax invoice without errors.
For businesses handling frequent estimates, approvals, tax invoices, and e-invoices, BUSY GST Accounting Software helps streamline the complete invoicing workflow from quotation to GST invoice and e-invoice generation.
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