Proforma Invoice: Meaning, Uses & Examples

A proforma invoice is a preliminary document sent by a seller to a buyer before a sale is finalised. It outlines the proposed products or services, prices, quantities, taxes and payment terms, helping both parties review the transaction before confirming the order.

Businesses commonly use proforma invoices for price confirmation, purchase approvals, advance payment discussions and export transactions. This guide explains the meaning of a proforma invoice, when to use it, what details it should contain, and how it differs from a regular invoice and quotation.

What is a Proforma Invoice?

A proforma invoice (also written as pro forma invoice) is an estimated invoice issued before a sale is completed. It provides the buyer with a detailed breakdown of the proposed transaction, including items, quantities, prices and terms.

Unlike a final sales invoice, a proforma invoice does not record a completed sale or serve as a GST tax invoice. It helps the buyer review the expected cost and allows the seller to confirm the agreed details before proceeding.

In simple terms, a proforma invoice is a pre-sale document that shows what the buyer can expect to pay if the transaction goes ahead.

Why Businesses Use a Proforma Invoice?

Businesses use proforma invoices to ensure there are no misunderstandings before a transaction is finalised.

It helps in clearly communicating:

• Pricing and discounts
• Product details and quantities
• Payment terms
• Delivery expectations

For buyers, it provides clarity and helps in internal approvals. For sellers, it reduces the chances of disputes or last-minute changes.

In B2B transactions, especially, a proforma invoice acts as a professional way to confirm the deal before issuing the final invoice.

When Should You Issue a Proforma Invoice?

A proforma invoice is typically issued before an order is confirmed. Businesses use it in several practical situations.

Common scenarios include:

• When a buyer requests price confirmation before placing an order
• When an advance payment is required
• When businesses need internal approvals (common in B2B)
• During export transactions for customs or documentation

For example, a wholesaler supplying goods to a retailer may issue a proforma invoice to confirm the quantity, expected cost and delivery terms before dispatch. Similarly, a manufacturer handling a customised order may share one for buyer approval before beginning production.

What Does a Proforma Invoice Include?

A proforma invoice should include enough information for the buyer to understand the proposed transaction and confirm the terms before placing an order.

The key details generally include:

• Proforma invoice number and date: A reference number and issue date to identify and track the document.

• Seller details: Business name, address, contact information and GSTIN, where applicable.

• Buyer details: Customer name, billing address, contact information and GSTIN, where relevant.

• Product or service description: Details of the goods or services being offered.

• Quantity and unit price: The number of items or units and the proposed rate for each.

• Taxes and discounts: Estimated applicable taxes, discounts and additional charges, where relevant.

• Estimated total amount: The expected transaction value after applicable adjustments.

• Validity period: The date until which the quoted prices and terms are valid.

• Payment and delivery terms: Any proposed advance payment, payment schedule, shipping charges or expected delivery date.

The document should be clearly labelled “Proforma Invoice” so it is not confused with a final tax invoice.

Proforma Invoice Example

Suppose a wholesale stationery supplier receives an enquiry from a retailer for 20 office chairs. Before the retailer confirms the purchase, the supplier sends a proforma invoice showing the proposed price, quantity and payment terms.

The proforma invoice may contain the following details:

Particulars	Details
Proforma Invoice No.	PI-2026-001
Seller	ABC Office Supplies
Buyer	XYZ Retail Store
Product	Office Chairs
Quantity	20
Price per Unit	₹1,000
Subtotal	₹20,000
Estimated GST (18%)	₹3,600
Estimated Total	₹23,600
Payment Terms	50% advance, balance before dispatch
Validity	15 days

Note: The GST rate is illustrative and should be checked against the applicable classification and current tax rules.

In this example, the retailer can review the expected amount of ₹23,600 and confirm the purchase terms before placing the order. Once the transaction proceeds, the supplier issues the appropriate final invoice according to the applicable invoicing requirements.

The proforma invoice itself does not represent a completed sale and cannot replace a GST tax invoice.

How to Create a Proforma Invoice

Creating a proforma invoice involves clearly outlining transaction details before finalising the sale. This ensures both the buyer and seller are aligned on pricing, terms, and expectations.

1. Add Business and Customer Details

Start by entering your business information along with the buyer’s details. This establishes who is involved in the transaction and ensures clear identification.

2. List Products or Services

Include a detailed description of the items or services being offered. Mention quantities and pricing to give the buyer complete visibility of what is being proposed.

3. Include Pricing, Taxes, and Total Amount

Add the total cost, including any applicable taxes, discounts, or additional charges. This helps avoid confusion and ensures transparency in the final amount.

4. Define Validity and Terms

Mention how long the proforma invoice is valid and include key payment or delivery terms. This helps set clear expectations before confirmation.

5. Review and Share with the Buyer

Carefully review all details and share the proforma invoice with the buyer for approval. Once confirmed, it can be converted into a final invoice.

If you regularly issue proforma invoices, you can also use the Proforma Invoice feature in myBillBook to prepare and share them with customers and convert approved transactions into sales invoices.

Proforma Invoice vs Invoice

A proforma invoice and a regular invoice may look similar, but they serve different purposes. A proforma invoice communicates the details of a proposed sale, while a final invoice documents an actual transaction and supports billing and accounting.

Basis	Proforma Invoice	Invoice
Purpose	Shows the details of a proposed transaction	Records a sale or supply and the amount payable
When Issued	Before the transaction is finalised	At the applicable invoicing stage for the sale or supply
Payment	May communicate proposed payment or advance terms	Specifies the amount due under the transaction
Legal Status	Preliminary document; legal effect depends on the agreement	Formal transaction document with applicable legal and tax requirements
GST	Not a GST tax invoice	May serve as a GST tax invoice if it meets legal requirements
Input Tax Credit	Cannot independently support an ITC claim	An eligible tax invoice may support an ITC claim, subject to GST conditions
Accounting	Does not, by itself, record a completed sale	Used to support recording the actual transaction
Changes	Proposed terms can be revised before agreement	Changes may require an amended document or applicable credit/debit note

Example: A furniture supplier may issue a proforma invoice showing the estimated cost of an order before the buyer confirms it. Once the taxable supply reaches the required invoicing stage, the supplier issues the appropriate invoice for the transaction.

Proforma Invoice vs Quotation

Both a quotation and a proforma invoice are used before a sale is completed. However, a quotation is generally shared during the enquiry or negotiation stage, while a proforma invoice is often issued when the proposed transaction details are more clearly defined.

Basis	Quotation	Proforma Invoice
Purpose	Offers prices and proposed terms	Presents a detailed, invoice-style summary of the proposed transaction
Typical Stage	During initial enquiry or price negotiation	Before finalising or processing an agreed order
Information Included	Proposed prices, products or services, scope and terms	Buyer and seller details, quantities, rates, estimated total and payment terms
Advance Payment	Usually used for price discussion	May also support a request for advance payment
GST Tax Invoice	No	No

For example, a manufacturer may first send a quotation offering 500 customised packaging boxes at a specified rate. After the buyer agrees to the design, quantity and pricing, the manufacturer may issue a proforma invoice showing the proposed final transaction details.

Both documents communicate pre-sale information, and businesses may use them differently depending on their sales process. Neither replaces the final invoice required for the actual transaction.

Is a Proforma Invoice Valid Under GST?

A proforma invoice can be used to communicate proposed prices, quantities and estimated GST before a sale is finalised. However, it is not a valid substitute for a GST tax invoice.

Under GST, registered suppliers must issue the appropriate tax invoice or other prescribed document when required by law. A proforma invoice alone cannot be used by a buyer to claim input tax credit (ITC).

Can GST Be Mentioned on a Proforma Invoice?

Yes. A seller may show the estimated GST applicable to the proposed goods or services so the buyer can understand the expected transaction value. The actual GST treatment and tax amount must be verified when issuing the required tax invoice.

Can a Proforma Invoice Be Used for Advance Payment?

A proforma invoice may be shared when a seller requests an advance before completing an order. However, receiving an advance may create separate GST documentation or tax obligations.

For example, applicable receipt-voucher requirements must be followed when an advance is received. The timing of GST liability can also differ between goods and services under the applicable rules.

Businesses should therefore treat the proforma invoice as a preliminary commercial document and follow the relevant GST requirements for advances and final invoicing.

Proforma Invoice Format & Templates

A proforma invoice generally follows a structured layout showing the seller and buyer details, items or services, estimated prices, taxes and transaction terms. The format may vary depending on the type of business and the information required by the buyer.

If you need a ready-to-use document, explore our Proforma Invoice Format and Templates for downloadable layouts.

You can also use the Proforma Invoice Format in Excel if you prefer preparing the document in a spreadsheet.