December 29, 2022
Reddy Mohith

Difference Between Pro Forma invoices & Tax invoices?

Invoices play a vital role in every business. They are the financial communications between the seller and the buyer to maintain smooth business transactions. The proper knowledge of invoices is necessary if you own a business and want to establish vigorous financial credibility. An invoice means a lot to a company. It shows the profit and losses, builds a business bond between the firm and the customer, shows the products and services in the function, and a lot more. Sometimes, your customer might ask you to present them with the pro forma invoice, which lands you in a difficult situation if you do not understand what it is.

This post will guide you through the differences between pro forma and tax invoices.

What is a pro forma invoice?

A pro forma invoice is an initial invoice generated by the seller for a customer. These invoices differ from the actual invoices with the complete details about the product, including the amount the buyer has to pay and briefs about the things a customer wants to know.

The pro forma invoice does not include any sold list. Instead, it is the estimation slip for a customer to understand. Generally, pro forma invoices consist of an agreement between the seller and the buyer. Pro forma invoices are sometimes used as temporary documents to supply the products for a seller within the specified prices.

Purpose of pro forma invoice:

The sole purpose of these invoices is to educate the buyer about the product's prices and help them decide on the quantity.

When is the pro forma invoice generated?

Sellers distribute the pro forma invoices to the customer before they buy any product or when there are no further discussions. Moreover, these invoices are like business proposals.

Format of pro forma invoice:

There are no guidelines to abide by to write a pro forma invoice. This invoice looks almost the same as a sales invoice. However, the invoice should say that it is a pro forma invoice on top of the list, which shows that it is not a finalized sales invoice. The general way of formatting this invoice is

1. Brand name, logo, and address

2. Invoice reference number

3. Issue Date

4. Customer's name

5. Products list or the services sold.

6. Product's quantity

7. Tax amount (if any)

8. Total payment

9. Payment details or options

10. Terms and conditions (should mention clearly)

Pro forma invoice applications:

Primarily, the applications of these invoices get into force before buying any product officially, and sellers or retailers issue these to their customers to clear the miscommunications during the process. It includes the product's price, quantity, and other essential information. However, pro forma invoices help customers in two ways.

1. When customers have changed their minds:

If a customer wants to make any changes to their list, they can effortlessly add or remove the items from the pro forma invoice and convert it into a final invoice, whereas the customer needs to re-raise the invoice if it is a final sale invoice.

2. When items get damaged during transit:

When customers receive a damaged product, they have to raise a credit note against the final invoice, but with a pro forma invoice, they can easily modify the errors with the necessary changes.

Pro forma invoices enable businesses to deal with the connections smoothly when a customer changes their mind about buying a particular product, reduces or increases the quantity, and other modifications in the invoice. Pro forma invoices differ from brand to brand.

What are tax invoices?

Tax invoices are invoices issued during the purchase of goods with details of the products purchased by the customer. Tax invoices indicate the confirmation of the purchase with non-negotiating terms. These invoices direct the buyer to pay the finalized amount for the goods purchased with all the taxes.

Purpose of tax invoices:

The purpose of tax invoices is to inform the customer or the buyer about the due amount for the purchased goods. They act as evidence for the transactions between the seller and the buyer.

When are tax invoices generated?

The customer receives a tax invoice when finalizing the sale. It contains product details, quantity, total due amount, taxes, and other particulars.

Format of tax invoices:

Unlike pro forma invoices, the tax invoice must include the following details.

1. Sellers name, address, and GSTIN

2. A serial number containing alphabets, numbers, and special characters

3. Issued date

4. Customer name, address, and GSTIN

5. If the purchase amount exceeds 50,000, include the name, buyer address, delivery address, state name, and state code.

6. Details of products

7. Total purchase value

8. Tax amount (should state this clearly)

9. Supplying place name and the destination name

10. Delivery address for places out of the supply area

11. The GST applicable amount and taxes after all the clearances

12. Seller's signature or other representatives

How can Swipe help you with pro forma and tax invoices?

Swipe is a one-stop destination for maintaining your financial details. Swipe helps you in every aspect of your business - from generating invoices to receiving payments to giving out annual reports of your money behaviour. You can generate pro forma and tax invoices with Swipe without worrying about the software's difficulty. Their software is user-friendly, which enables anybody to operate it.


Check out details about GST, Income Tax Guide, Union budget

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