If you run a business in India, you have almost certainly sent or received both a proforma invoice and a tax invoice — and you may have used the terms interchangeably. Under GST they are very different documents with very different legal weight. Getting the distinction right keeps your books clean, your GST returns accurate, and your customers clear about what they are actually paying for.
What is a proforma invoice?
A proforma invoice is a preliminary bill of sale sent before the supply is made. Think of it as a formal quotation dressed up like an invoice: it tells the buyer what they will be charged, in the layout of a real invoice, so they can approve the order, arrange payment, or open a letter of credit.
A proforma invoice typically includes the description of goods or services, quantity, estimated price, applicable GST rate, and payment terms. What it does not do is create any tax liability. It is not recorded as a sale, it does not go into your GSTR-1, and the buyer cannot use it to claim input tax credit.
What is a tax invoice?
A tax invoice is the statutory document that a registered supplier must issue on making a taxable supply, as required by Section 31 of the CGST Act and Rule 46 of the CGST Rules. It is the document that:
- Creates the GST liability on the supplier.
- Entitles the recipient (if registered) to claim input tax credit.
- Must be reported in your GSTR-1 and forms the basis of your GSTR-3B tax payment.
A tax invoice must carry a consecutive serial number unique to the financial year, the supplier’s and recipient’s GSTIN, HSN/SAC codes, taxable value, and the GST split (CGST + SGST or IGST), among the other fields listed in Rule 46.
Proforma invoice vs tax invoice — side by side
| Feature | Proforma Invoice | Tax Invoice |
|---|---|---|
| Purpose | Quote / confirm an order before supply | Record an actual taxable supply |
| Legal status under GST | Not a statutory document | Mandatory statutory document (Sec 31, Rule 46) |
| Creates GST liability? | No | Yes |
| Allows input tax credit? | No | Yes (for the registered recipient) |
| Uses your invoice serial number? | No | Yes — consecutive, FY-wise |
| Reported in GSTR-1? | No | Yes |
| Issued | Before the supply / payment | At or before the time of supply |
When should you issue each one?
Issue a proforma invoice when the deal is not yet final — to give the customer a firm quote, to request an advance, or when the buyer’s procurement process needs a document to raise a purchase order. It commits neither side to the tax treatment.
Issue a tax invoice at the time of supply. Under GST the timing rules are specific: for goods, on or before the removal or delivery; for services, within 30 days of supply. The moment you make the supply, the proforma must be converted into a proper tax invoice.
What about advances?
If a customer pays an advance against a proforma invoice for services, GST is payable on the advance at the time of receipt, and you should issue a receipt voucher for it. (For goods, GST on advances is generally not payable for most taxpayers.) When you finally make the supply, you issue the tax invoice and adjust the advance already received. The proforma invoice itself never discharges this obligation.
The bottom line
A proforma invoice is a promise; a tax invoice is a record. Only the tax invoice moves money through the GST system — it creates your liability and unlocks your customer’s input tax credit. Use a proforma to win and confirm the order, then always close the loop with a compliant tax invoice.