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.
A Purchase Order (PO) is a formal document issued by a buyer to a supplier, authorising a specific purchase. Once the supplier accepts it, the PO becomes a legally enforceable contract between both parties.
A standard PO includes: PO number and date, buyer's name, address, and GSTIN, supplier's name, address, and GSTIN, line items (product, HSN code, quantity, unit, unit price), GST rate and amount, total value, delivery address, delivery date, and payment terms (Net 30, advance + balance, etc.).
POs protect both sides: the buyer cannot claim a different price than what's on the PO; the supplier has a documented, enforceable order and can use the PO to raise a bank invoice discounting facility (a form of working capital finance).
In Indian B2B trade, disputes over verbal orders are extremely common. A proper PO eliminates ambiguity. Under the MSMED Act, if an MSME supplier holds an accepted PO but the buyer delays payment beyond 45 days, the buyer owes compound interest at 3× RBI base rate.
On VyaparSethu, when a buyer accepts a supplier's Quotation, the system auto-generates a structured Deal record that functions as a PO. Payment is then collected and held in Protected Payment (escrow) until delivery is confirmed.
Frequently Asked Questions
What is the difference between PO and invoice?
A PO is issued by the buyer before goods are dispatched — it authorises the purchase. An invoice is issued by the supplier after delivery — it requests payment.
Is a purchase order legally binding?
Yes, once the supplier accepts a PO (in writing or by acting on it — e.g., starting production), it becomes a binding contract.
Does a purchase order need to be on letterhead?
No legal requirement in India, but it should clearly identify both parties, the PO number, and the terms. A digital PO with e-signature is equally valid.
What is a blanket purchase order?
A blanket PO covers multiple deliveries over a period (e.g., 100 MT of steel to be delivered in 10 monthly lots). Useful for regular suppliers with ongoing supply contracts.
Related 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".
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.
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 Escrow Payment (Protected Payment)?
An escrow holds the buyer's payment with a neutral third party until the supplier delivers as agreed — eliminating advance payment fraud in B2B trade. VyaparSethu calls this "Protected Payment".
Put this knowledge to work
Post a Requirement — verified suppliers quote with proper GST invoices, HSN codes, and Protected Payment on every deal.