What is a Proforma Invoice? | Meaning, Examples & Templates

What is a Proforma Invoice?

To start, let's clarify that a proforma invoice is a type of document invoice. Proforma invoices come in a variety of forms, but they are most frequently used in international trade. A proforma invoice is used to estimate the cost of goods or services for customers or to request upfront payment. A proforma invoice is an offer to sell goods or services at a stated price rather than a legally binding contract. Its details may be negotiated before a formal agreement is achieved. It includes information about the cost and the terms of delivery, among other relevant facts.

Why do we need to use the Proforma invoice in India?

A proforma invoice should be ready before the sale is completed. It provides advanced data regarding the group action between the client and vendor. More precisely, when customers want to order anything from a merchant but require more details about the good or service before making a decision.

For instance, if a client demands paperwork for products or services that haven't yet been delivered, the seller will produce a proforma invoice. It is published ahead of the publication of the tax invoice.

The final invoice total will match that of the proforma invoice. To facilitate delivery, a proforma invoice is utilized for customs purposes for both imports and exports. When the buyer accepts the price listed on the proforma invoice, the seller will send the product as soon as it is prepared, and the buyer will make payment as soon as the invoice is received.

Contents of Proforma invoice

The proforma invoice must include the following details in India:

• The date and unique invoice number
• Name, address, phone number, and GSTIN of the vendor
• A description of the sold-out goods or services, as well as amount, unit price, total worth, the place of supply of the goods or services
• Prospective buyer's name, address, contact data and GSTIN
• The conditions of the transaction, including the terms of payment, shipment, and guarantee
• The duration of the proforma invoice's validity
• Signature of the supplier's company representative
• Certificates needed, if any, by "Customs Authorities"

What is the aim of a Proforma Invoice?

Here are some of the several reasons for issuing a proforma invoice:

1. It functions as an initial bill of sale.

2. To let a buyer know what kind and quality of goods to expect.

3. Asking the customer for early payment for the goods or services to be provided.

4. Providing the buyer with delivery details in advance.

5. To calculate the costs of the goods or services that will be provided.

What Significant Changes Exist Between the Indian Pre-GST Proforma Invoice and the GST Proforma Invoice?

1. The primary distinction is that proforma invoices issued before the introduction of the Goods and Services Tax (GST) did not include GST.

2. Another difference is that a proforma invoice under GST is issued by the vendor, while a pre-GST proforma invoice might be issued by either the buyer or the seller.

3. A proforma invoice under GST must contain the GSTIN of the vendor, while a pre-GST proforma invoice does not ought to contain this information.

4. Lastly, a pre-GST proforma invoice cannot be utilized for advance payment; a GST proforma invoice can.

Differences Between Invoice, Proforma Invoice, Purchase Order and Estimates/Quotations

This table, which Kernel has developed for you, details the key distinctions and parallels between an invoice, a proforma invoice, a purchase order, and quotations/estimates. It aids in your comprehension of how and when to employ each.

What is the Difference Between Tax Invoices and Proforma Invoices?

An invoice, as used in the GST system, is a record that contains information on a transaction's price, quantity, and terms of sale. Proforma invoices are provided prior to a sale and differ from ordinary invoices in that they do not contain final pricing or terms of sale. It's used to obtain a contract or order and often contains an estimate of the goods or services sold.

A proforma invoice is not a bill, which is its primary distinction from a conventional invoice. It is simply an estimation of the total cost. In international trade, proforma invoices are frequently used and might include charges for insurance, shipping, and other expenses.

A tax invoice is issued by an enlisted vendor, and maybe a record that's utilized to charge GST on the supplies made. A proforma receipt is issued by the provider in the progress of the supplies being made and is utilized to assess the GST that will be charged.

Learn more about the Differences Between Tax Invoices and Proforma Invoices.

What is the Difference Between proforma invoices and estimates/quotations?

 

The price of goods or services is estimated using both proforma invoices and estimates/quotations. The most considerable difference between a proforma invoice associated with an estimate or quotation is that a proforma invoice is typically issued before a particular sale takes place.  In contrast, an associate estimate or quotation is issued when the sale has been arranged.

Need to know more about the Differences Between Quotations and Proforma Invoices? Read the article.

What is the Difference Between Proforma Invoice and Purchase Order in India?

A proforma invoice is diverse from a buy arrange in that a proforma receipt isn't an authoritative record. On the other hand, a purchase order could be an authoritative contract between a buyer and a seller. A proforma invoice is an assessment of what the ultimate receipt will be, whereas a purchase order is an actual order for goods or services.

Learn more about the Differences Between Purchase Orders and Proforma Invoices.

General Terms And Conditions That Can Be Included In Proforma Invoices?

The terms and conditions, which are contained in the proforma invoice, are the guidelines that the buyer and seller have agreed upon. Depending on the product or service that was purchased, these terms and conditions might change. A proforma invoice may contain the following typical terms and conditions:

- Payment terms:

This includes the strategies of payment acceptable to the vendor, the timeframe within which payment is to be created, and any discounts which will be offered for early payment.

- Delivery terms:

This includes the delivery methodology, the timeframe within which the merchandise or service is going to be delivered, and any charges related to delivery.

- Returns and cancellations:

This includes the seller's policy on returns and cancellations and any charges related to returns or cancellations.

- Warranties and guarantees:

This includes any warranties or guarantees offered by the vendor and also the timeframe within which these warranties or guarantees square measure valid.

Frequently Asked Questions

1. What exactly is a proforma invoice?

A proforma invoice is a statement that a seller sends to a purchaser before a transaction occurs. It serves to estimate the price of the items or services that the buyer will be purchasing.

2. What details ought to be included on a proforma invoice?

In India, a proforma invoice must contain the following information:

• The buyer's name, address, and GSTIN;
• The proforma's validity period;
• The seller's name, address, and GSTIN;
• A description of the sold goods or services;
• The HS Code of the goods being sold;
• The quantity of goods being sold;
• The unit price of the goods being sold;
• The total price of the goods being sold;
• The location of the supply of the goods or services;
• The terms of delivery of the goods or services

3. What is the difference between a proforma invoice and a tax invoice?

After a deal has been completed, a seller will send a tax invoice to the purchaser. A proforma invoice could be a record that a vendor issues to a buyer in the development of a sale.

4. What is the difference between a proforma invoice and an estimate?

A vendor will provide a buyer with an estimate that includes the expected cost of the items or services being purchased. A proforma invoice is a report given by a dealer to a purchaser ahead of a deal. It gives the purchaser an expected expense of the labour and products being bought.