Proforma invoice vs tax invoice vs quotation: what is the difference?
Quotation, proforma invoice, and tax invoice explained — what each one is for, when to issue it, and which one actually creates a GST liability.
By Invoicify Team
A quotation is a price offer, a proforma invoice is a good-faith preview of a sale, and a tax invoice is the real, legally binding document that creates your GST liability. They look similar, but only the tax invoice counts for GST — mixing them up is a common and avoidable mistake.
Quotation: "here is my price"
A quotation (or estimate) is what you send before a deal is agreed. It sets out the goods or services and the price so the customer can decide. It is not a demand for payment and has no GST consequence — it is a sales document, not an accounting one.
You can revise a quotation freely until the customer accepts it.
Proforma invoice: "here is what the invoice will look like"
A proforma invoice is issued after interest is confirmed but before the actual supply. It previews the final invoice — line items, quantities, and the expected tax — so the buyer can arrange payment, an advance, or internal approvals.
Key point: a proforma invoice is not a tax invoice. It does not create a GST liability, it is not recorded as a sale, and your buyer cannot claim input tax credit on it. Think of it as a formal "this is what you will be billed."
Tax invoice: the real thing
The tax invoice is the legally recognised document for a taxable supply under GST. Issuing it:
- creates your output GST liability,
- lets your buyer claim input tax credit, and
- must follow the prescribed GST invoice format with all mandatory fields.
This is the document that flows into your GST returns.
Quick comparison
| Document | Purpose | Creates GST liability? | Buyer can claim ITC? |
|---|---|---|---|
| Quotation | Offer a price | No | No |
| Proforma invoice | Preview the sale | No | No |
| Tax invoice | Bill a taxable supply | Yes | Yes |
A typical flow
- Send a quotation to win the work.
- On confirmation, send a proforma invoice so the customer can pay an advance or approve.
- On supply, issue the tax invoice — the compliant, final document.
Good billing software lets you move through these in one click. In Invoicify, you can send a quotation or proforma and convert it to a GST tax invoice without re-typing anything — handy for consultants and service businesses who quote before they bill.
Remember the one line that matters: only the tax invoice is "real" for GST. The other two help you get there.
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