What is a proforma invoice?
A proforma invoice is a document a seller sends before supplying goods or services, describing exactly what will be supplied and at what price. It's a commitment, not a demand for payment under GST. You can't claim input tax credit on it, and it isn't recorded as a sale.
When businesses use one
- Advance payment: the customer needs a document to release an advance.
- Imports and exports: buyers use it to apply for import licences, letters of credit or foreign exchange.
- Internal approvals: the customer's purchase team needs a near-final bill to raise a purchase order.
- Customs and shipping: to declare the value of goods before the final invoice exists.
What to include
- The heading "Proforma Invoice", clearly shown.
- Proforma number and date (use a separate series from your tax invoices).
- Your business details and GSTIN; the buyer's details.
- Description, HSN/SAC, quantity, rate and amount for each item.
- Applicable GST shown for information, and the total.
- Validity, delivery timeline, and payment terms (for example 50% advance).
- Bank and UPI details for the advance, if requested.
Proforma vs quotation vs tax invoice
| Quotation | Proforma invoice | Tax invoice | |
|---|---|---|---|
| Purpose | Offer a price | Confirm the deal before supply | Record the supply and charge tax |
| Sent | On enquiry | After the buyer agrees, before supply | On or after supply |
| GST charged | No (shown only) | No (shown only) | Yes |
| Input tax credit | No | No | Yes, for the registered buyer |
| In your sales books | No | No | Yes |
Proforma invoices and CappsAI Studio
CappsAI Studio doesn't have a separate "proforma invoice" document type. Most small businesses send an accepted quotation with payment terms and bank/UPI details for the advance, then convert it into a GST tax invoice in one click when they supply. If you need a document titled "Proforma Invoice", use the free quotation template in Word or Excel and change the heading.