A proforma invoice and a tax invoice can look almost identical on paper, which is exactly why they get confused. But they do very different jobs, and using the wrong one at the wrong time causes payment delays and GST headaches. Here's the difference, simply.
What is a proforma invoice?
A proforma invoice is a *quotation-style estimate* sent before a sale is confirmed. It tells the buyer: "this is what the order will cost if you go ahead." It's used to:
- Give the customer a firm price to approve or raise a purchase order against.
- Help the buyer arrange funds, credit or an import licence.
- Confirm quantities and terms before you commit stock.
A proforma is not a demand for payment, is not recorded in your books as a sale, and has no GST effect. You can revise it freely.
What is a tax invoice?
A tax invoice is the real, legal document raised when the sale happens (or goods are dispatched/services delivered). It:
- Is a formal demand for payment.
- Is recorded as a sale in your accounts.
- Carries GST that you must report and pay, and that the buyer uses to claim input-tax credit.
- Must contain specific details required by law — your GSTIN and the buyer's, invoice number and date, HSN codes, taxable value and the CGST/SGST/IGST split.
Once issued, a tax invoice can't simply be edited — corrections are made with a credit or debit note.
Side-by-side
| | Proforma invoice | Tax invoice | |---|---|---| | When | Before the sale | At the time of sale | | Purpose | Estimate / price confirmation | Demand for payment | | In your books? | No | Yes | | GST impact | None | Reported & payable | | Buyer claims ITC? | No | Yes | | Can be revised? | Freely | Only via credit/debit note |
The typical flow
- Customer enquires → you send a quotation or proforma invoice.
- Customer approves / sends a PO → you create a sales order.
- Goods or services delivered → you raise the tax invoice.
- Any change afterwards → credit or debit note.
Avoiding the mix-up
The safest way to never confuse the two is to let your software manage the flow. In CraveInvoice you create a proforma or quotation, and when the deal is confirmed, convert it to a tax invoice in one click — the items and prices carry through, the GST is applied correctly, and the sale lands in your books and GST reports automatically.
Learn more about sales and invoicing in CraveInvoice, or read how credit and debit notes handle post-invoice adjustments.