What is a Pro Forma Invoice?
A preliminary invoice sent before goods are dispatched. It confirms price, quantity, and terms — used to get buyer approval and arrange advance payment or LC.
A Pro Forma Invoice (PI) is a draft invoice sent by a supplier to a buyer before the actual sale. It is not a demand for payment — it's a commitment of what the supplier will supply, at what price, and on what terms.
Pro forma invoices are commonly used when: the buyer needs an advance payment invoice to get internal approval or release payment from finance; the goods are being imported (customs uses it for valuation); or the buyer is arranging a Letter of Credit (LC).
A pro forma invoice looks like a real invoice but is clearly marked "Pro Forma Invoice" or "Not a Tax Invoice." It does not need to comply with GST invoice format rules — it has no tax number, and GST is not yet charged.
Once the buyer approves the pro forma and sends the advance payment (or opens an LC), the supplier ships the goods and issues the actual Tax Invoice (GST Invoice), which is the legal document for payment and ITC.
On VyaparSethu, when a supplier submits a Quotation, it functions as a pro forma — the buyer can review, negotiate, and accept. On acceptance, the platform auto-generates a final invoice for the Protected Payment step.
Frequently Asked Questions
Is a pro forma invoice a legal document?
Not in the tax sense — it cannot be used to claim GST ITC. But it is contractually binding as a price and specification commitment from the supplier.
Does a pro forma invoice need GST?
No. GST is not charged on a pro forma invoice. It is only a pre-sale commitment. GST is charged on the final tax invoice after delivery.
When do I use a pro forma invoice vs purchase order?
Buyers issue POs to suppliers. Suppliers issue pro forma invoices to buyers. Both serve to document agreed terms before shipment — they complement each other.
Can a pro forma invoice be cancelled?
Yes. Since no tax has been charged and no legal payment obligation exists yet, either party can cancel or revise a pro forma by mutual agreement.
Related Terms
What is a GST Invoice (Tax Invoice)?
A tax invoice is the mandatory legal document issued by a GST-registered supplier at the time of supply. It enables the buyer to claim Input Tax Credit (ITC).
What is a Purchase Order (PO)?
A Purchase Order is a legally binding commercial document a buyer issues to a supplier confirming the agreed product, quantity, price, delivery date, and payment terms.
What is RFQ (Request for Quotation)?
A Request for Quotation is a formal document a buyer sends to suppliers asking for price, lead time, and terms — the first step in any B2B procurement. On VyaparSethu it's called a "Requirement".
Put this knowledge to work
Post a Requirement — verified suppliers quote with proper GST invoices, HSN codes, and Protected Payment on every deal.