What Is a Proforma Invoice? Meaning, GST Treatment, Format and Export Use (2026)

A buyer asks for "a PI before we release the advance". An overseas importer wants one to open a letter of credit. Your own bank asks for one before it remits money to a foreign supplier. The proforma invoice turns up at the start of almost every serious order, yet it's widely misunderstood — people book it as a sale, charge GST on it, or claim input tax credit against it. This guide is for Indian sellers, buyers and accountants. It explains what a proforma invoice is, what it should contain, how it differs from a GST tax invoice, how GST works when an advance is paid against it, how exporters and importers use it, and gives a ready template with worked ₹ examples, checked against the CGST Act and Rules in October 2026.

Quick answer

A proforma invoice is a preliminary bill a seller issues before supply, setting out the goods or services, quantities, prices, taxes and terms so the buyer can approve the order, pay an advance or arrange finance. It is not a tax invoice under GST: it creates no GST liability, isn't reported in returns and can't support input tax credit.

• Issue it before supply; the GST tax invoice follows at dispatch or billing

• No GST on the proforma itself; GST on a service advance is due when the advance is received

• Advances for goods are exempt from GST under Notification 66/2017-CT

• Buyers can't claim ITC on a proforma — only on the tax invoice

• Exporters use it for letters of credit and advance payments

What is a proforma invoice?

"Pro forma" is Latin for "as a matter of form". A proforma invoice is a document that has the form of an invoice — seller and buyer details, item lines, rates, tax, totals, bank details and terms — but is issued before the sale is complete. It tells the buyer exactly what they will be billed if they go ahead.

In everyday Indian trade, a proforma invoice does four jobs:

• Confirms the order. It turns an informal enquiry or negotiated quotation into a precise offer the buyer can approve internally.
• Supports an advance payment. Many sellers, especially in custom manufacturing, ask for 30–50% upfront; the buyer's finance team needs a document to release money against.
• Feeds the buyer's paperwork. Government departments, PSUs and large companies often need a proforma to raise a purchase order or sanction a budget.
• Supports trade finance and imports. An overseas buyer's bank uses it to open a letter of credit, and an Indian importer's bank uses it to send an advance remittance abroad.

What it doesn't do is record a sale. No goods have left your premises and no service has been delivered, so there is no revenue to book and no debt the buyer owes. If the buyer walks away, there is nothing to cancel in your books.

Where the proforma sits in a typical order

Step 1

Enquiry

Step 2

Quotation

price offer

Step 3

Proforma invoice

firm offer, no GST

Step 4

Advance + receipt voucher

GST on services

Step 5

Supply

dispatch or delivery

Step 6

Tax invoice

GST, GSTR-1, ITC

Proforma invoice vs tax invoice under GST

Under GST, the tax invoice is a statutory document. Section 31 of the CGST Act requires a registered supplier of goods to issue it before or at the time of removal or delivery, and a supplier of services to issue it within the prescribed period. Rule 46 lists its mandatory particulars, from GSTIN and HSN code to place of supply and signature. The tax invoice fixes the time of supply, goes into GSTR-1 and, if you're above the e-invoicing threshold, is registered on the IRP for an IRN.

A proforma invoice has none of that legal standing. The CGST Act and Rules don't mention it at all. So:

• No GST liability arises when you issue it. Sections 12 and 13 tie the time of supply to the date of the tax invoice or the date payment is received — not to a proforma.
• It isn't reported in GSTR-1 or GSTR-3B.
• The buyer can't claim ITC on it. Section 16(2)(a) allows credit only if the buyer holds a tax invoice, debit note or other prescribed tax-paying document from a registered supplier.
• No IRN is generated for it, even for e-invoicing taxpayers — e-invoicing applies to tax invoices, credit notes and debit notes. See our e-invoice guide.

Proforma invoice vs tax invoice vs receipt voucher

	Proforma invoice	Tax invoice	Receipt voucher
Purpose	Offer/estimate before supply	Bill for a completed or due supply	Acknowledges an advance received
Legal basis	Commercial practice; Contract Act if accepted	Section 31 CGST Act; Rule 46	Section 31(3)(d); Rule 50
When issued	Before supply, often before payment	At removal/delivery (goods) or within prescribed time (services)	When an advance is received
GST payable?	No	Yes, on the invoice value	Yes for services; not for goods advances
Reported in GSTR-1?	No	Yes	Yes, in the advances table
Buyer's ITC	Not allowed	Allowed if conditions met	Not allowed on the voucher
Accounting entry	None	Sale and receivable	Advance (liability)

Purpose

Proforma invoice

Offer/estimate before supply

Tax invoice

Bill for a completed or due supply

Receipt voucher

Acknowledges an advance received

Legal basis

Proforma invoice

Commercial practice; Contract Act if accepted

Tax invoice

Section 31 CGST Act; Rule 46

Receipt voucher

Section 31(3)(d); Rule 50

When issued

Proforma invoice

Before supply, often before payment

Tax invoice

At removal/delivery (goods) or within prescribed time (services)

Receipt voucher

When an advance is received

GST payable?

Proforma invoice

No

Tax invoice

Yes, on the invoice value

Receipt voucher

Yes for services; not for goods advances

Reported in GSTR-1?

Proforma invoice

No

Tax invoice

Yes

Receipt voucher

Yes, in the advances table

Buyer's ITC

Proforma invoice

Not allowed

Tax invoice

Allowed if conditions met

Receipt voucher

Not allowed on the voucher

Accounting entry

Proforma invoice

None

Tax invoice

Sale and receivable

Receipt voucher

Advance (liability)

Because the documents look similar, label the proforma clearly. Put "PROFORMA INVOICE" as the title, use a separate number series (for example PI/2026-27/014), and add a line such as "This is not a tax invoice. A GST tax invoice will be issued at the time of supply." That single line saves many arguments with a buyer's accounts team.

What a proforma invoice should contain

There is no prescribed format, but a good proforma mirrors the eventual tax invoice so the buyer sees exactly what they will be charged. Include:

• Seller details — legal name, trade name, address, GSTIN, PAN, contact.
• Buyer details — name, billing and delivery address, GSTIN if registered, state and state code.
• PI number and date, plus a validity date ("Prices valid until 31 October").
• Item lines — description, HSN or SAC code, quantity and unit, rate, discount, taxable value.
• GST — rate and amount of CGST/SGST or IGST, based on the place of supply, so the buyer budgets the full cost.
• Totals in figures and words.
• Delivery terms — dispatch date or lead time, place of delivery, freight and insurance, and for exports the Incoterm (FOB, CIF and so on).
• Payment terms — advance percentage, balance terms, due dates, and your bank details (account, IFSC; SWIFT and bank address for exports).
• Other terms — warranty, cancellation, jurisdiction, and the "not a tax invoice" line.
• Signature of an authorised person.

Create a proforma invoice in two minutesFree, no login — add items, HSN codes, GST, advance terms and bank details, then download a PDF to send to your buyer.

Proforma invoice template

Here is a simple format you can adapt. Values are illustrative.

Two lessons are built into that template. Quote GST at "the rate in force on the date of supply" when the supply could fall after a rate change — the GST 2.0 rate rationalisation from 22 September 2025 caught many sellers whose proformas had promised the old rate. And state clearly who pays freight, because that changes the taxable value on the final invoice.

GST when the buyer pays an advance against a proforma

This is where the real tax consequences sit. The proforma doesn't trigger GST, but the money paid against it might.

Advance for goods. Since Notification 66/2017-Central Tax dated 15 November 2017, registered persons (other than composition taxpayers) don't pay GST on advances received for the supply of goods. Tax is paid when the tax invoice is issued at dispatch. You should still issue a receipt voucher to acknowledge the money.

Advance for services. No such exemption exists. Under section 13, the time of supply of services is the earlier of the invoice date and the date payment is received, so GST is due on the advance in the month you receive it. You must issue a receipt voucher under Rule 50 showing the advance, the rate and the tax. If the rate can't be determined at that point, Rule 50 says tax is paid at 18%; if you can't tell whether the supply is intra-State or inter-State, it is treated as inter-State.

From proforma to tax invoice — services example

1. 1

   Send the proforma

   A Delhi software firm sends a PI for a ₹2,00,000 project plus GST at 18% — ₹2,36,000 in all — with 50% payable in advance.

2. 2

   Receive the advance and issue a receipt voucher

   The client pays ₹1,18,000. Treating it as tax-inclusive, the taxable value is ₹1,00,000 and GST is ₹18,000. The firm issues a receipt voucher and pays ₹18,000 with that month's GSTR-3B.

3. 3

   Deliver and issue the tax invoice

   On completion, the firm issues a tax invoice for ₹2,00,000 + ₹36,000 GST and adjusts the ₹18,000 already paid, so only ₹18,000 more GST is due.

4. 4

   Client claims ITC

   The client claims ₹36,000 ITC on the tax invoice once it appears in GSTR-2B — not on the proforma or the receipt voucher.

For a goods example, take a Ludhiana manufacturer that receives ₹1,50,000 as advance against a proforma for ₹5,00,000 of machine parts. It issues a receipt voucher but pays no GST then. When it dispatches the parts and issues the tax invoice, GST is paid on the full ₹5,00,000. If the order is cancelled before supply and the advance is returned, a refund voucher is issued and there's nothing to reverse.

Using a proforma invoice for exports and imports

In international trade the proforma invoice matters even more, because banks and customs authorities on the buyer's side rely on it.

When you export, the overseas buyer typically asks for a proforma to:

• open a letter of credit — the buyer's bank copies the goods description, quantity, price, Incoterm, shipment period and documents required into the LC, so any mismatch with your later commercial invoice can cause a discrepancy;
• arrange an advance payment through its bank;
• apply for an import licence or permit in its own country, where one is needed.

Your proforma for exports should therefore add the fields an LC or bank needs: the Incoterm and named place (for example "FOB Nhava Sheva"), port of loading and discharge, HS code, country of origin, packing details, net and gross weight, shipment period, currency, payment terms (advance, LC at sight, documents against payment) and full bank details with SWIFT code. Remember that the LC will be checked against your commercial invoice and shipping documents, not the proforma — but if the proforma was wrong, the LC usually is too.

When you import, the roles reverse. Your Indian bank (the authorised dealer) will ask for the foreign supplier's proforma invoice before sending an advance remittance. HSBC's advance remittance form, for example, asks for a proforma invoice clearly showing payment terms as "Advance" and accepted by the importer, along with a purchase order acknowledged by the supplier. Check with your bank whether it needs a bank guarantee above a certain advance amount.

A worked example: a Rajkot pump maker quotes a Nairobi distributor for 100 pumps at US$150 each, FOB Mundra, 30% advance and balance against documents. The PI shows US$15,000 total, US$4,500 advance and the SWIFT details. The distributor's bank remits the advance against the PI. When the pumps ship, the exporter issues a commercial invoice and, for GST, an export tax invoice — zero-rated, under LUT or with IGST paid and refunded. Read how to start an import-export business and IEC registration for the rest of the export paperwork.

Proforma invoice vs quotation, estimate and purchase order

These four documents sit at different points of the same deal.

In many B2B deals the sequence is quotation → purchase order → proforma (for the advance) → tax invoice. In others, the seller's proforma comes first and the buyer's PO confirms it. Either way, make sure the PO and PI agree on quantity, price and terms. Our guide to what a purchase order is covers the buyer's side.

Is a proforma invoice legally binding?

A proforma invoice isn't a tax document, but it isn't meaningless in law either. Under the Indian Contract Act, 1872, an agreement made by free consent for lawful consideration is a contract. A proforma that states definite goods, prices and terms is an offer. When the buyer signs it, issues a matching PO or pays the advance it asks for, that offer is accepted and both sides are bound by what it says.

That has practical consequences. If your proforma says "delivery in 21 days" and you take 45, the buyer may claim for the delay. If it promises a price "valid until 31 October", you can't raise it on 20 October for a buyer who has accepted. And if it says nothing about cancellation, recovering costs on a custom order becomes harder. Treat the proforma as a draft contract, not a casual estimate.

Who can issue a proforma, and how to revise one

Any seller can issue a proforma invoice — a GST-registered company, a composition dealer, or a small unregistered business below the GST threshold. What changes is the tax line. A regular registered supplier shows the expected CGST/SGST or IGST so the buyer can budget the full cost. A composition dealer can't collect GST from customers, so its proforma should show no tax and, like its final bill of supply, should not suggest that GST is being charged. An unregistered business shows no GSTIN and no tax at all; showing "GST extra" on a proforma when you aren't registered invites trouble later.

Proformas often need revising. The buyer cuts the quantity, asks for a different model, or the exchange rate moves before an export order is confirmed. Don't edit and resend the same document with the same number. Issue a fresh proforma with a new number, mention which earlier PI it replaces ("supersedes PI/2026-27/014"), and keep both on file. If an advance has already been paid against the old one, show it as received on the new one so the balance is clear. This audit trail matters when an order is disputed months later, and it is exactly what a buyer's bank or a GST officer will ask to see if the final invoice and the advance don't line up.

Common mistakes with proforma invoices

• Booking it as a sale. Sales registers and receivables get inflated, and GST reconciliations break. Record nothing until the tax invoice.
• Using the tax invoice number series. This creates gaps or duplicates in your GST invoice series. Keep a separate PI series.
• Claiming ITC on a supplier's proforma. It will be reversed with interest when the department matches your credit against GSTR-2B.
• Forgetting GST on service advances. Paying GST only with the final invoice leads to interest for the months in between.
• No validity date. Prices, exchange rates and GST rates move. Always set a validity date and say that GST will be charged at the rate on the date of supply.
• Mismatch with the LC or PO. A different description or Incoterm on the proforma, PO, LC and commercial invoice is the most common reason export payments get held up.

Official links

• CGST Act — section 31 (tax invoice)When a GST tax invoice must be issued
• CGST Rules — Rule 46 (tax invoice contents)Mandatory invoice particulars
• CGST Rules — Rule 50 (receipt voucher)Document for advances received
• Notification 66/2017–Central TaxNo GST on advances for goods
• GST portalReturns, advances table in GSTR-1

What to do next

Create your proforma with the free proforma invoice generator, and when the goods ship or the service is done, raise the GST-compliant bill with the invoice generator. If you collect advances for services, set up a receipt voucher format at the same time so GST on advances is never missed.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is a proforma invoice in simple words?

A proforma invoice is a preliminary bill a seller sends before supplying goods or services. It looks like an invoice — items, quantities, prices, taxes, terms — but it is a confirmed offer, not a demand for payment of a completed sale. Buyers use it to approve the purchase, arrange advance payment, open a letter of credit or apply for an import licence. The real tax invoice follows when the goods are dispatched or the service is billed.

Is GST payable on a proforma invoice?

No. Issuing a proforma invoice does not create any GST liability, because it is not a tax invoice under section 31 of the CGST Act and does not fix the time of supply. GST becomes payable when the tax invoice is issued or, for services, when an advance is received, whichever is earlier. For goods, GST on advances has been exempt since Notification 66/2017-Central Tax.

Can a buyer claim input tax credit on a proforma invoice?

No. Section 16(2)(a) of the CGST Act allows input tax credit only if the buyer holds a tax invoice, debit note or other prescribed tax-paying document from a registered supplier, and the details appear in GSTR-2B. A proforma invoice is none of these. Claim ITC only after the supplier issues the tax invoice and reports it in GSTR-1.

Is a proforma invoice legally binding?

A proforma invoice is not a tax document, but it can become part of a binding contract. If it is a clear offer and the buyer accepts it — by signing it, issuing a matching purchase order or paying the advance — an agreement forms under the Indian Contract Act, 1872. That is why the validity period, prices and payment terms on a proforma should be exactly what you are willing to honour.

What is the difference between a proforma invoice and a quotation?

A quotation is an early price offer, often for comparison, and may be revised many times. A proforma invoice usually comes after the buyer has shown intent to buy: it sets out the final quantities, prices, taxes, delivery and payment terms in invoice form, ready for the buyer's approval, bank or customs paperwork. Many sellers send a quotation first and a proforma once the order is agreed.

Do I need to record a proforma invoice in my books?

No accounting entry is passed for a proforma invoice because no sale has taken place and nothing is receivable yet. If the buyer pays an advance against it, record the advance as a liability (advance from customer) and, for services, issue a receipt voucher with GST. The sale is recorded only when the tax invoice is issued.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 8 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.CGST Act, section 31 — Tax invoice — CBIC · accessed 8 October 2026
2. 2.CGST Rules, Rule 46 — Tax invoice — CBIC · accessed 8 October 2026
3. 3.CGST Rules, Rule 50 — Receipt voucher — CBIC · accessed 8 October 2026
4. 4.CGST Act, sections 12 and 13 — Time of supply of goods and services — CBIC · accessed 8 October 2026
5. 5.CGST Act, section 16 — Eligibility and conditions for input tax credit — CBIC · accessed 8 October 2026
6. 6.Notification No. 66/2017–Central Tax (15 November 2017) — GST Council · accessed 8 October 2026
7. 7.Application for advance remittance towards direct import bills — HSBC India · accessed 8 October 2026
8. 8.Proforma invoice under GST: what it is and how it works — Busy Infotech · accessed 8 October 2026