What is the difference between a proforma invoice and a tax invoice?

A proforma invoice is a preliminary estimate sent before a sale — it's not a legal document and creates no GST liability. A tax invoice is the actual bill issued when the sale happens; it's a legal GST document that creates tax liability and lets the buyer claim input tax credit.

Can a proforma invoice be used to claim input tax credit?

No. Input tax credit can only be claimed on a valid tax invoice, not a proforma invoice.

Is a proforma invoice legally binding?

No. A proforma invoice is a quotation or estimate, not a demand for payment or a record of sale. It simply tells the buyer what to expect before the deal is confirmed.

How does a proforma invoice become a tax invoice?

Once the buyer confirms and the goods or services are supplied, you convert the details into a tax invoice with a unique invoice number and the actual GST — that becomes the legal bill.

Proforma Invoice vs Tax Invoice: What's the Difference?

Q: Does a proforma invoice have GST?

A proforma invoice can show the expected GST so the buyer knows the likely total, but it does not create any GST liability and the buyer cannot claim input tax credit on it. Only a tax invoice does that.

If you’ve ever sent a customer an estimate before the actual bill, you’ve likely used a proforma invoice — even if you didn’t call it that. Many business owners mix it up with a tax invoice. This guide explains the difference in plain language, so you always send the right document at the right time.

What is a proforma invoice?

A proforma invoice is a preliminary bill or estimate you send to a customer before the sale is finalised. It shows what the goods or services will cost — including the expected GST — so the buyer can review, approve, or arrange payment.

Key point: it is not a legal or tax document. It doesn’t record a sale, doesn’t create any GST liability, and isn’t a demand for payment. It’s essentially a formal quotation.

You’d typically use a proforma invoice to:

Give a customer a price estimate before confirming an order.
Get internal approval or a budget sign-off from the buyer.
Negotiate or request an advance before you dispatch goods.

What is a tax invoice?

A tax invoice is the actual, legal bill you issue when the sale happens — when goods are supplied or services delivered. Under GST, it’s the official document that:

Creates your GST liability (the tax you must pay to the government).
Lets your buyer claim input tax credit (ITC).
Is recorded in your books and reported in your GST returns.
Carries a unique, consecutive invoice number.

In short, the tax invoice is the one that actually counts for tax and accounting.

Proforma invoice vs tax invoice: the key differences

Rule of thumb: a proforma invoice says “here’s what it will cost”; a tax invoice says “here’s what you owe.”

Aspect	Proforma Invoice	Tax Invoice
Purpose	Estimate / quotation before the sale	Actual bill after the sale
When issued	Before goods/services are supplied	When goods/services are supplied
Legal status	Not a legal document	Legal GST document
GST liability	None	Yes — creates tax liability
Input tax credit	Cannot be claimed	Buyer can claim ITC
Demand for payment	No — just an estimate	Yes — payable bill
Invoice number	Not part of the tax invoice series	Unique, consecutive number
Recorded as a sale	No	Yes — entered in books & returns

When should you use each?

Situation	Send this
Customer asks “how much will this cost?”	Proforma invoice
You need approval or an advance before dispatch	Proforma invoice
Goods are delivered / service is done	Tax invoice
You’re recording the sale and paying GST	Tax invoice

Does a proforma invoice have GST?

A proforma invoice can display the expected GST so the buyer sees the likely total — but it does not create any GST liability, and the buyer cannot claim input tax credit on it. Only the tax invoice does both. So think of the GST on a proforma as informational, not official.

How a proforma invoice becomes a tax invoice

The flow is simple:

Send a proforma invoice with the estimated items, prices and GST.
The customer reviews and confirms the order (and may pay an advance).
You supply the goods or services.
You issue a tax invoice — with a unique invoice number and the actual GST. This is now the legal bill, recorded in your books and returns.

Make both effortless

You don’t need two separate tools for this. With KhataBuddy you can share a clean estimate with a customer and raise a fully GST-compliant tax invoice in seconds — with the correct HSN code and GST rate applied automatically, ready to send on WhatsApp. Try KhataBuddy free and bill the right way, every time.