Proforma Invoice under GST: Meaning, Format, Template, Examples

Did you know “pro forma” is a Latin term, which means “for the sake of form” or “as a matter of form”?. If you receive a bill marked as a pro forma invoice, is it binding upon the seller, or does it have a time limit to act upon?. If you’re a supplier, you may have questions about whether the look of a pro forma invoice has changed under Goods and Services Tax (GST)?. This article will help you to clear all your doubts regarding the pro forma invoice.

Meaning of Proforma invoice

A pro forma invoice is a document providing information regarding the particulars of the goods or services yet to be delivered to the buyer/customer. It details estimated prices of the available goods or services. It also consists of the estimate of any commissions, applicable taxes, the weight of the shipment, shipping costs etc. A supplier/retailer issues a pro forma invoice to an enquiring buyer/customer.

When is Pro forma invoice used?

A pro forma invoice is made before the sale happens. For example, a supplier will issue a pro forma invoice if a customer requests him to produce a document for goods or services yet to be delivered. Hence, it is usually issued before the issue of tax/commercial invoice.

The final invoice amount will be the same or close to the amount on the pro forma invoice. Pro forma invoices are more often used for customs purposes on imports or exports for a smooth delivery process.

For example, A two-wheeler customer might agree to the price of a bike on the pro forma invoice. The supplier will deliver the bike once it is ready, and the customer will pay when the invoice is received.

Purpose of issuing Pro forma invoice

• To provide estimated sale price of goods yet to be delivered or services yet to be rendered (estimated total cost).
• To provide an understanding of contents to be shipped, the value of the goods, shipping time, etc., to the customer. 
• To declare the supplier’s commitment to the buyer about providing the goods or services described at specified prices

Also, pro forma invoices are helpful when two companies are doing business together for the first time.

Note: The customer must not make any payments on the goods or services detailed. Therefore, the supplier should not record a pro forma invoice as accounts receivable, and the buyer should not record it as accounts payable.

Contents of Pro forma invoice

A pro forma invoice should include the following information:

• Unique invoice number
• Date of preparation/issue
• Address of the supplier
• Address of the prospective buyer
• Description of goods or services, including their unit costs and line-item totals
• Validity of the pro forma invoice
• Proposed terms of sale
• Proposed terms of payment, if any
• Certifications required by “Customs Authorities” if any
• Signature by an authorized person from supplier’s company

Format of Pro forma invoice

No law prescribes the exact format of a pro forma Invoice, but this is issued as part of best business practices. A pro forma invoice may look almost exactly the same as a commercial invoice. However, it should be clearly labelled “pro forma”, and may also include the phrase “This is not a GST invoice”. The pro forma invoice is only an estimate and should not be paid until the work is done and the final tax invoice is issued.

Sample Format of Pro forma invoice under Pre-GST laws

Sample format of Pro forma invoice under GST law

Significant changes in Pro forma invoice under GST as compared to Pre-GST Pro forma invoice

Pro forma invoices under pre-GST law and GST law are not much different in format or content. They almost remain the same except for the below:

• GST pro forma invoice contains GST registration number while the former contains VAT/ CST/ Sales Tax registration number 
• In addition, the GST pro forma invoice contains additional information regarding HSN codes of goods, SAC codes of services
• GST Classification into SGST, CGST and IGST based on whether the supply is an intrastate or interstate supply

Differences between invoice, pro-forma invoice, estimates and purchase order