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Proforma Invoice under GST - What is Proforma Invoice?, Purpose, Importance, and Proforma invoice format for GST Introduction A 'proforma invoice' is a document that looks like an invoice but is not. It comprises information on the goods or services that have not yet been delivered to the buyer. 'Proforma' means 'for the sake of form' or 'as a matter of form' in the Latin language. In this article, we will include information on "What is Proforma Invoice?", Purpose, importance of Proforma invoices under GST, and the Proforma invoice format for GST. In the world of business, invoices serve a critical function in confirming a transaction and serving as confirmation of a legally binding contract between a buyer and a seller, under which the seller is obligated to deliver the products or services. The buyer, on the other hand, is obligated to pay according to the terms and circumstances stated on the invoice. However, not all of these documents can be considered invoices. During any transaction, several documents are issued from the buyer to the seller and vice versa. There is an interchange of documents from the time the inquiry is made until the transaction is completed, each with its own name and function. What is Proforma Invoice? A proforma invoice is a document that details the specifics of products or services that have yet to be delivered to the buyer/customer. It provides a pricing estimate for the things or services that are being offered. It also includes an estimate of any commissions, the shipment's weight, any taxes, and shipping rates. An inquisitive buyer/customer receives a Proforma invoice from a retailer/supplier. Purpose of Proforma invoice under GST (Goods and Service Tax) Estimating the sale price of things that have not yet been delivered or services that have not yet been rendered. To offer the consumer with an understanding of the contents to be transported, the worth of the goods, shipping time, and so on. To express the supplier's commitment to the buyer to provide the goods or services described at the agreed-upon price. When two businesses are doing business for the first time, proforma invoices are also useful. Note: The consumer is not required to make any payments for the items or services listed. As a result, a Proforma invoice should not be recorded as accounts receivable by the supplier, and it should not be recorded as accounts payable by the customer. Importance of GST Proforma Invoice in India The fundamental goal of a ProForma invoice is to present the buyer with an estimate of value, product kind, and other payment terms ahead of time. As a result, the customer can decide whether or not to purchase the products based on the proforma invoice. Before the final transaction, a proforma invoice is frequently sent. If a customer requests a Proforma invoice in order to discover the approximate price and products to be delivered, the seller is obligated to provide one. Such an invoice is frequently required by an importer in order to obtain import permits, generate a letter of credit, or pay for cash. Furthermore, a ProForma invoice is utilised for shipments including things that are not meant for sale or purchase, such as gifts, original product samples, and so on. Aside from that, the vendor will provide a ProForma invoice to customs in order for the products to be issued at the port of entry. Proforma invoice format for GST (Goods and Service Tax) Except from the title, the contents of a Proforma Invoice are comparable to those of an invoice. On a proforma invoice, the following information is included: A unique Invoice Number needs to be mentioned Date of publication The potential buyer's address Supplier's Address The commodities to be supplied, their names, quantities, values, taxes, and rates must all be described. Payment conditions. The Proforma Invoice's Validity Bank Supplier information The sale's terms and conditions will be proposed If the Customs authorities require certification, provide it Signature of the supplier's authorized person An original/tax invoice is not the same as a proforma invoice. As a result, it is without legal standing. As a result, neither participant in a supply transaction is legally bound by it. Except for a few points listed below, there is no difference between pre-GST and post-GST Proforma invoices The GST Proforma Invoice must include both the seller's and the potential buyer's unique GST numbers. Previously, the Value Added Tax (VAT), Central Sales Tax (CST), or Service Tax Registration numbers were mentioned in place of these. In addition, the Servicing Accounting Code (SAC) and Harmonized System of Nomenclature (HSN) for each line item must be specified separately beneath the description of goods and services. The GST rates, as well as the tax amounts for the State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Integrated Goods and Services Tax (IGST), must be listed next to each item, indicating whether the sale is interstate or intrastate. Suggested read: What are Inter-State GST and Intra State supply under GST? Difference Between GST Proforma Invoice and Invoice GST Proforma Invoice Invoice A Proforma invoice is a document that details the specifics of products or services that have yet to be delivered to the consumer or buyer. The term invoice refers to a commercial document delivered by a supplier to a consumer or buyer that contains information on the goods or services that were provided to him as well as a notice regarding payment requirements. GST Proforma Invoice is issued to the buyer before the services/goods are delivered. On the other hand, invoices are issued when the supplier receives the payment from the buyer for the services/goods provided by the supplier. The main objective behind the GST Proforma invoice is To assist the buyer in making judgments about whether or not to place an order. The objective behind generating an invoice is to notify the buyer that the payment is due for the services/goods offered by the supplier. GST Proforma Invoice is created for the purpose of selling goods/service to the buyer Invoices are created for the confirmation of the sales. GST Proforma Invoice is negotiable. On the other hand, invoices are non-negotiable. It is issued by the supplier to the buyer for general purposes and to bring clarity regarding the terms of selling goods/services. It is issued by the supplier, and the buyer is bound to pay the amount related to the goods/services purchased from the supplier. It is issued to the buyer or a consumer It is similar to a Proforma invoice, it is issued to the consumer or buyer. FAQs on Proforma Invoice under GST (Goods and Service Tax) 1. Is it possible for a customer to bargain over the information mentioned in the proforma invoice? A proforma invoice is, in fact, negotiable. A customer might haggle about price, shipping expenses, and delivery time, among other things. Even after both parties have signed it, it can be changed. 2. What is the format of a GST proforma invoice? Because GST is not payable on sending a proforma invoice, it is beyond the scope of GST. In addition, the GST statutes do not specify a format. 3. Is it possible to account for a proforma invoice in the books of account? A proforma invoice is not the same as a real invoice. As a result, the financial transaction is not recorded in the books of accounts. 4. What is the duration of a Proforma Invoice's validity? The proforma invoice specifies the validity period. Its validity varies from company to company and industry to industry. Conclusion A Proforma invoice is a pre-sale invoice rather than a sale invoice. It is a document that aims to make a sale and contains all of the information found on the invoice. It imposes no responsibility on the buyer to pay any sum, nor does it impose any obligation on the supplier to provide products. Unless the parties agree to pay any advance money based on the Proforma invoice, there are no payment obligations. Before entering into a legitimate transaction in GST, it is common to submit a GST Proforma invoice because it provides better clarity on the contract conditions for both parties.

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