A customer wants to place a large order. Before confirming it, they want to know the price, quantity, GST, payment terms, and delivery details. You could send all of this information through separate messages or emails. But when several details need to be agreed upon, having everything in one document makes the conversation much clearer.
It gives the buyer a clear picture of the proposed transaction before the final invoice is issued. For businesses in India, however, it is important to understand that a proforma invoice is not the same as a GST tax invoice.
It also should not be treated as the document for claiming Input Tax Credit. The relevant final tax documents need to be available for the recipient to claim eligible ITC according to GST rules.
Similarly, businesses should not treat a proforma invoice as a document that needs to be reported as a tax invoice in their GST returns.
Once you know what information belongs in the document, creating one becomes straightforward.
Getting these details right at this stage can also make the final invoicing process easier later.
Clearly label the document PROFORMA INVOICE.
|
Proforma Invoice
|
Tax Invoice
|
|---|---|
|
Used before the final transaction documentation
|
Issued for the applicable taxable supply
|
|
Provides proposed prices and terms
|
Records the actual invoice details
|
|
Not a GST tax invoice
|
GST tax invoice where applicable
|
|
Not used by itself for claiming ITC
|
Relevant tax invoice can support eligible ITC subject to GST conditions
|
|
Used for customer review and confirmation
|
Used as the final billing document
|
GST Billing & Invoicing Software
Category List
Transform your billing with our top-notch software. Fast, accurate invoicing—start optimizing today!
No comments yet. Be the first to share your thoughts.
This will close in 20 seconds