A commercial invoice and a GST invoicing software both look almost similar, but the purpose for which they are created is different. This article provides information about the basic difference between both the types of GST Proforma Invoice and the actual purpose of creating a proforma invoice.
What is Proforma Invoice?
A proforma invoice is like a sample invoice sent to an enquiring customer about the basic details of the sale. It is sent to the prospective buyer even before a sale is confirmed. A proforma invoice typically contains the details of the products, quantity, estimated price, estimated taxes, delivery details, and other terms and conditions. It’s almost like a commercial sales invoice, except it does not contain an invoice number and is not a legal document. Once the buyer confirms the deal, the seller will convert the proforma invoice into a sales invoice or create a new one.
Purpose of Proforma Invoice
A proforma invoice is typically issued at the buyer’s request. It is issued when the seller and buyer had a discussion about the sale but cannot send an official invoice as the final details of the sale are not confirmed. As the proforma invoice contains almost all the details of a commercial invoice, the former will give the buyer a clear idea about what to expect from the sale. Proforma invoices are typically used for customs purposes on imports or exports for smooth delivery.
A proforma invoice serves the following purposes-
- Provides estimated cost of the products to be delivered.
- Provides information about the products to be shipped, delivery time, etc.
- Provides supplier’s commitment to the buyer to provide goods & services at discussed prices.
Changes in Proforma Invoice Post GST
There is no major difference between proforma invoices before and after the introduction of GST law. There are a few differences as follows –
- Proforma invoices now contain GST registration numbers, while previous proformas contain VAT, CST, or sales tax registration numbers.
- The current proforma invoices also contain HSN codes of goods or SAC codes of services.
- Proforma invoices also contain GST classification of CGST, SGST and IGST.
Difference between Proforma Invoice & Sales Invoice
A sales invoice is generated once the sale is made, while a proforma invoice is issued even before a sale is finalised.
- A commercial invoice is a mandatory document, whereas a proforma invoice is not as per the legal requirement.
- An invoice is a legal document, whereas a proforma invoice is not.
- An invoice is used for accounting and auditing purposes, whereas a proforma invoice is not required for accounting purposes.
- The purpose of an invoice is to request payment from the buyer, whereas a proforma invoice is issued to inform the buyer what to expect from the sale.
- A proforma invoice is a negotiable document, whereas a commercial invoice is non-negotiable.
How to Create Proforma Invoice
Invoicing software in India has gained much popularity as it is easy to use and simplifies the entire billing & accounting process. You can create a proforma invoice using a simple Word document or you can use any online invoice generator to create one. One of the credible ways to create a proforma invoice is to use billing & invoicing software. An invoicing software generates proforma invoices in seconds and allows you to convert them into sales invoices once the sale is finalised. Choose a GST invoicing software to create GST-complaint proforma invoices and sales invoices to simplify tax filing.
