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Pro Forma Invoice Under GST

What would you do if you received a bill marked as ‘Pro Forma invoice’? Many questions arise about whether this is binding on the seller or if it has a time limit to act on. Moreover, if you are a supplier, maybe you have questions about whether the Pro Forma Invoice format has changed under GST or not. Here are all the answers you will need for these questions.

What Is A Pro Forma Invoice?

A Pro Forma invoice is a document that presents information about the particulars of the goods or services that are yet to be delivered or performed. This has the estimated prices of goods or services and the other details like commission, shipping costs, shipment weight, and applicable taxes. A retailer/supplier usually issues this invoice first to a customer, informing them about the goods/services proposed/finalised before a Tax/Commercial invoice is provided.

When Is A Pro Forma Invoice Issued/Used?

A Pro Forma invoice is usually raised before the actual sale happens. It is generally issued if a customer asks the supplier for a document about the goods or services yet to be delivered. It is also used for the smooth delivery processing of imports and exports (for customs).

How Is A Pro Forma Invoice Useful?

This can be explained with the help of a typical example: If you have chosen to buy a car, you will visit the showroom and finalise a price and even pay a deposit before the vehicle is delivered. At this time, the showroom will provide you with a Pro Forma invoice. After the car is ready, you will receive an invoice that you pay for. This final Tax Invoice will have the details as mentioned in the Pro Forma invoice. or in case there are changes in the final price/terms, it will be visible here.

Contents Of Pro Forma Invoice

A Pro Forma invoice under GST is not very different from what it was before GST. However, it will need to have the GST registration number and additional information such as the HSN code/SAC code and the bifurcated tax rate and amount (SGST, CGST, IGST, and UTGST).

An ideal Pro Forma invoice should contain the following information:

  • Unique invoice number
  • Date of issue
  • Address of the supplier with GSTIN
  • Address of the prospect/customer
  • Description of the goods and services along with the cost per unit, HSN/SAC code, bifurcated tax rate and amount, value of goods/services
  • Validity of the Pro Forma invoice
  • Terms of payment
  • Custom authorities certifications (if needed)
  • Suppliers/Authorised person’s signature

Important: This invoice should contain the words ‘Pro Forma invoice’. Some vendors also add the words ‘This is not a GST bill’.

Importance Of Pro Forma Invoice

  • A Pro Forma invoice can be used to give the customer an estimate of the sale price for the goods/services that are going to be offered.
  • This invoice also helps in understanding the contents that are to be shipped, the shipping time, the value of the goods, etc., so that the customer knows the approximate value of the goods and time for delivery.
  • It is instrumental when two companies or individuals are working together for the first time.
  • There is no mandate for issuing a Pro Forma invoice. However, Businesses voluntarily issue this document as a universally accepted best practice.

GST Compliance

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