All about Proforma Invoice under GST

A proforma invoice is a preliminary invoice that is issued by a supplier to a buyer before the actual supply of goods or services takes place. It serves as a commitment from the supplier to supply the goods or services, and provides the buyer with an estimate of the costs involved.

Purpose of issuing Pro forma invoice

The purpose of issuing a proforma invoice is to provide a preliminary estimate of the cost of goods or services that are to be supplied. A proforma invoice is not a legally binding document, but it can be used for a variety of purposes, including:

1. To provide an estimate of costs to a buyer: A proforma invoice can be used to provide a buyer with an estimated cost of the goods or services that are to be supplied, allowing the buyer to make informed decisions about the purchase.

2. To secure financing or obtain approval: In some cases, buyers may need to secure financing or obtain approval from a third party before placing an order. A proforma invoice can be used to provide the necessary information to secure financing or obtain approval.

3. To confirm a sale: A proforma invoice can be used to confirm a sale and provide a buyer with an estimated cost of the goods or services that are to be supplied.

4. To provide a customer with an estimated cost: A proforma invoice can be used to provide a customer with an estimated cost of goods or services before a final agreement is reached.

5. To facilitate customs clearance: Proforma invoices are commonly used in international trade as a preliminary document for customs clearance and to provide information about the goods being shipped.

It is important to note that a proforma invoice is not a legally binding document and does not create a tax liability. The actual supply of goods or services must be accompanied by a tax invoice in order to be considered a taxable supply under the Goods and Services Tax (GST) regime.

When is the Pro forma invoice used?

A proforma invoice is used in a variety of situations where a preliminary invoice is required, prior to the actual supply of goods or services. Some common scenarios in which proforma invoices are used include:

1. When a buyer requests an estimate of costs before placing an order: In this scenario, the supplier can issue a proforma invoice to provide the buyer with an estimated cost of the goods or services being supplied.

2. When a buyer needs to secure financing or obtain approval: In some cases, buyers may need to secure financing or obtain approval from a third party before placing an order. A proforma invoice can be used to provide the necessary information to secure financing or obtain approval.

3. When a supplier wants to confirm a sale before shipping goods: In some cases, suppliers may want to confirm a sale before shipping goods. A proforma invoice can be used to confirm the sale and provide the buyer with an estimated cost of the goods being supplied.

4. When a supplier wants to provide a customer with an estimated cost: In some cases, a supplier may want to provide a customer with an estimated cost of goods or services before a final agreement is reached. A proforma invoice can be used to provide the customer with this information.

5. When goods are being shipped to an international destination: Proforma invoices are commonly used in international trade as a preliminary document for customs clearance and to provide information about the goods being shipped.

It is important to note that a proforma invoice is not a legally binding document, and is used for informational purposes only. The actual supply of goods or services must be accompanied by a tax invoice in order to be considered a taxable supply under the Goods and Services Tax (GST) regime.