Pro Forma Invoice Under GST

Pro Forma Invoice Under GST

A Pro Forma invoice is a company's initial sales invoice to sellers before the goods or services delivery/transfer. Typically, this type of invoice declares the description, value, quantity, shipping information and payments for the products/services that will be bought.

It contains information related to SAC codes of services and HSN codes of goods. It also shows how the tax rates are classified into CGST, SGST, and IGST based on whether the supply is interstate or intrastate.

Because most Pro Forma invoices have a specific purchase cost for the customer, they often determine some commissions or charges, such as relevant taxes. This document generally brings great faith and eliminates exposing the purchaser to unforeseen or substantial fees once the transaction has occurred.

Benefits of Pro Forma Invoice Under GST

• A Pro Forma invoice is usually given before the final transaction occurs. A seller is thus expected to submit a Pro Forma invoice if the consumer demands such an invoice to learn the approximate price and the products to be delivered
• But, these invoices are used most commonly for transactions involving exports. In the event of an export transaction, an enquiry is submitted by the prospective client sitting overseas. A quotation accompanies a query like this. The supplier readies a Pro Forma invoice in response to such quote, giving expected cost and other details such as product description, sale terms etc
• An importer often requires such an invoice to receive import permits, to create a letter of credit or to pay for funds. Furthermore, a Pro Forma invoice is used for shipments composed of products not intended for selling or buying, like presents, original product samples etc
• Besides this, the seller will supply the customs with a Pro Forma invoice to have the products issued at the port of entry
• The main aim behind the drafting of a Pro Forma invoice is to provide the buyer, in advance, with an estimation of value, form of product and other payment terms. Therefore, based on the Pro Forma invoice, the buyer may determine whether to buy the products or not.

Checklist Points to Be Considered for Preparing Pro Forma Invoice

• No accounting application should be rendered dependent on a Pro Forma invoice
• The invoice does not merit GST deduction
• Sales are not guaranteed by Pro Forma invoice
• This is released instead of the final invoice and can not be replaced as the final invoice
• This form of an invoice shall also have a legitimate reference on it throughout the period.
• The actual payment sum would usually be identical to the value of the Pro Forma invoice
• Consumers need not make payments under this document
• Any tax obligation or benefit claim may be made on a Pro Forma invoice basis.

Significant improvements to the Pro Forma invoice under GST in contrast with the Pro Forma invoice before GST include:

• GST Pro Forma invoice contains GST registration online number, whereas the former includes the registration number of VAT/ST/sales tax
• More detail regarding HSN Code Check, SAC service codes and classification tax rates in SGST, CGST and IGST is found in the GST Pro Forma invoice, depending on whether the supply is made intrastate or interstate.

Difference Between Pro Forma and Tax invoice

Tax Invoice: It is a commercial document given to the purchaser by a supplier of products or services. Such a report includes information such as the names of the people involved, goods or services to be supplied, rates, quantities, etc. A tax invoice shall inform the buyer about the due amount.

Pro Forma Invoice: It is a document given to a potential buyer by a supplier in exchange for an enquiry made by him/her. It's a quote specifying the items, their approximate price, delivery period, conditions of sale, and billing information.

Purpose of the Invoice

Tax Invoice: It is evidence of a sale against which the seller may collect payment from the buyer. In other words, it is a contract that legitimately requires both buyer and seller to enforce the conditions of sale negotiated against an agreement of this kind.

Pro Forma Invoice: It is used to provide the potential buyer with an advance estimation of quality, product form, and other terms of sale. Therefore, based on the Pro Forma invoice, the prospective consumer can determine whether to purchase those products.

Time of Issue

• Tax Invoice - Before making the bill from the retailer
• Pro Forma Invoice - Before the delivery of the goods or services to the customer

Details Entered on a Pro Forma Invoice

• Date of issue
• Supplier's address along with his/her GSTIN
• Buyer's address along with his/her GSTIN
• Definition of products or services like a number, size, HSN / SAC codes, IGST, CGST, and SGST tax rates
• Period of validity
• Proposed terms and conditions
• Payment terms proposed
• Supplier's bank account details and IFSC code
• Supplier's authorised signatory.

Pro Forma Invoice Format for GST

There are no guidelines to define the Pro Forma invoice format. It could appear like an actual commercial invoice. The document title will be mentioned explicitly as 'PRO FORMA' to represent an estimate, and it's not the actual tax invoice.

Steps to File Income Tax Returns Through Vakilsearch

• Step 1: Our agents will set up a call with you and collect all the necessary documents to file the form
• Step 2: Our expert team will file GST, and the process will be completely transparent
• Step 3: Your return will be filed, and you will get all the details.

Why Vakilsearch?

India's most prominent legal service platform, Vakilsearch, caters to each customer's needs during registration. Our legal experts will get in touch with you and inform you about the Pro Forma invoice and its benefits, making it easy for you to understand. Vakilsearch has a handful of legal experts who guide you in every step, making it less stressful when you want to comply with your GST registration. Our support team will provide you with chat assistance throughout the entire process.