GST Implications for Proforma Invoices in India: Key Rules, Formats & Compliance Guide

A **proforma invoice** under GST in India is a preliminary document that outlines estimated costs, goods, or services before actual delivery. Unlike tax invoices, it does not create GST liability but must comply with specific GST requirements for transparency.[1][2]

What is a Proforma Invoice Under GST?

Proforma invoices provide an estimated overview of transactions, aiding negotiations, especially in exports and imports. They are non-binding and marked as such to avoid legal obligations. Under GST, they bridge buyer-seller communication, reducing disputes while ensuring compliance.[1][2]

Essential Elements of a Proforma Invoice

Key components include:

• Unique invoice number and date.
• Supplier and buyer details, including GSTIN.
• Description of goods/services with HSN/SAC codes, unit prices, and totals.
• Validity period, payment terms, and sale conditions.
• GST classification (CGST, SGST, IGST) based on intra/inter-state supply.
• Customs certifications and supplier signature.[1][2][3]

Unlike pre-GST, GST proforma invoices replace VAT/CST with GSTIN and add HSN/SAC codes.[1][2]

GST Applicability on Proforma Invoices

No GST payment or liability arises from proforma invoices alone, as GST regime lacks provisions for them. They are not valid for tax deductions, accounting entries, or input tax credit (ITC). Actual tax invoice under Section 31 of CGST Act triggers liability upon supply or assured payment.[3][4][5][6]

For **advance payments** against proforma, GST applies on receipt, but full liability shifts to the tax invoice post-supply.[2][4]

Proforma Invoice vs Tax Invoice: Key Differences

This table highlights why proforma cannot substitute tax invoices.[4][5][8]

Steps to Create a Compliant Proforma Invoice Under GST

1. Assign unique number and date; add seller/buyer details with GSTIN.
2. List items with quantities, rates, HSN/SAC, and GST breakdown.
3. Specify terms, validity, payments; indicate if prices include/exclude GST.
4. Include extras like shipping; sign off.[2][4]

Special Considerations: Rent Invoice and GST

In scenarios like **rent invoice** for property leases, proforma versions estimate rental value plus GST (typically 18% for commercial). They preview SGST/CGST for intra-state or IGST for inter-state rent supplies but do not trigger payment until tax invoice issuance. Always classify correctly to avoid disputes.[1][2]

International Trade and Exports

For exports, proforma aids customs; services exports are zero-rated with LUT, no GST charged. Include GST/LUT statement.[9]

Common Mistakes and Best Practices

Avoid omitting GST rates, HSN/SAC, or terms. Maintain records with GSTIN, descriptions, taxes for audits. Revise by updating invoice number if terms change.[2][4]

Best practices: Clearly mark 'Proforma Invoice - Not Valid for Tax Purposes'. Issue only pre-supply/pre-payment.[5]

Legal Framework and Record-Keeping

GST laws guide usage without explicit proforma definition. Retain copies with full details for compliance. For advances, follow GST on payments; convert to tax invoice post-supply.[2][7]

Proforma invoices ensure smooth trade under GST while preventing premature liabilities. Businesses must distinguish them from tax invoices like **rent invoice** to maintain accurate accounting and claim ITC correctly.[3][5]