What is a proforma invoice?
A proforma invoice is a document a seller issues to a buyer in advance of a sale, showing the goods or services on offer, quantities, prices and expected taxes. It looks almost identical to a final invoice but carries no legal obligation to pay and does not record a completed transaction.
Businesses use it to confirm an order, let a buyer raise a purchase order, request an advance, or give an overseas buyer the paperwork needed to open a letter of credit and clear customs. Because nothing has been supplied yet, no GST becomes payable and the buyer cannot claim input tax credit against it.
You will also see it spelled performa invoice, pro forma invoice or even performance invoice. These are all common misspellings of the same Latin term, pro forma, meaning as a matter of form. PI is the standard abbreviation used in export and manufacturing.
Proforma invoice vs invoice, tax invoice and quotation
The four documents look similar but do very different jobs. A quotation opens a negotiation, a proforma invoice confirms agreed terms before supply, a tax invoice records the completed sale and creates the GST liability, and a commercial invoice is the customs document for an export shipment.
| Proforma invoice | Tax invoice | Quotation | Commercial invoice | |
|---|---|---|---|---|
| Purpose | Confirm terms before supply | Record a completed sale | Offer a price to negotiate | Declare an export shipment to customs |
| Legally binding | No | Yes | No | Yes |
| Creates GST liability | No | Yes | No | No (export) |
| When issued | Before supply | On or after supply | Before an order | At shipment |
| Can buyer pay against it | Yes, often as advance | Yes | Not usually | Yes |
| Gives GST input credit | No | Yes | No | No |
Proforma invoice format: what to include
A proforma invoice should carry everything a final invoice will, so the buyer can approve it without surprises. Mark it clearly as a proforma invoice and add a validity date, because prices and stock can change.
- The words Proforma Invoice and a note that it is not a tax invoice
- Your business name, address and GSTIN, and the buyer's details
- A proforma number and date, plus a valid-until date
- Line items with description, quantity, unit price and amount
- Applicable GST or other taxes shown for information
- Total payable, in the currency of the deal
- Payment terms, for example 50% advance, and delivery terms
When to send a proforma invoice: advance payment, approvals and customs
Send one when a buyer needs to commit before you supply. The three most common triggers are an advance payment, an internal approval or purchase order, and cross-border shipping.
For an advance, the buyer pays against the proforma and you issue a receipt voucher, then a final tax invoice on supply. For approvals, procurement teams attach the proforma to raise a PO. For imports, the buyer's bank and customs use it to release funds and pre-clear the shipment.
Proforma invoice for export
Export buyers rely on a proforma invoice more than domestic ones do. Overseas buyers use it to open a letter of credit, apply for an import licence and pre-clear customs before the shipment leaves the origin country.
For export, show the currency of the contract, the Incoterms such as FOB or CIF, the port of loading and destination, and the HS codes for the goods. Keep the description consistent with the commercial invoice you will raise at shipment.
Excel, Word, PDF and Tally: format options compared
You can build a proforma invoice in a spreadsheet, a document, accounting software or an online tool. Each has trade-offs.
Excel and Word templates are free but you re-key details every time and it is easy to leave the tax maths wrong. Tally and other accounting packages keep numbering tidy but need a licence and setup. A dedicated online generator gives you a clean, correctly-totalled PDF in a minute with no software, which is why most small exporters and traders use one for ad-hoc proformas.
How to create a proforma invoice in 4 steps
Use the generator above to make one in under a minute.
- Enter your business details and the buyer's details, and pick a currency
- Add each item with its quantity and price, and set the GST rate if you show tax
- Add a proforma number and a valid-until date so the buyer knows the offer window
- Preview the proforma invoice live and download it as a PDF to send or attach to a PO
Frequently asked questions
What is a proforma invoice?
A proforma invoice is a preliminary bill sent to a buyer before goods or services are delivered. It sets out what will be supplied and what it will cost, so the buyer can approve the order, arrange payment or clear customs. It is not a demand for payment and it does not create a tax liability.
What is the difference between a proforma invoice and an invoice?
A proforma invoice is an estimate issued before the sale is confirmed. A tax invoice is issued after supply, is legally binding, and is the document that creates the GST liability and the buyer's input tax credit.
Is a proforma invoice the same as a quotation?
They are close but not identical. A quotation opens a negotiation. A proforma invoice usually comes after terms are agreed and is formatted like the final invoice, which is why buyers use it to raise a purchase order or release an advance.
Can GST be charged on a proforma invoice?
Tax can be shown on a proforma invoice so the buyer sees the full landed cost, but it does not become payable and the buyer cannot claim input credit against it. Credit only arises from a tax invoice.
Can a buyer pay against a proforma invoice?
Yes, and it is common for advance payments. Once the payment is received, issue a receipt voucher or the final tax invoice as required.
What is PI in invoicing?
PI is the standard abbreviation for proforma invoice, used widely in export and manufacturing correspondence.
Why is it spelled performa invoice sometimes?
Performa, performance invoice and pro forma are all common misspellings of proforma, which comes from the Latin for as a matter of form. They all refer to the same document.
Is a proforma invoice needed for export?
It is standard practice. Overseas buyers use it to open a letter of credit, apply for an import licence, and pre-clear customs before the shipment leaves.