Pro Forma Invoice Under GST

The concept of a pro forma invoice has been around for a while now. It has been used as the primary tool for ensuring the collection of dues from the buyer by the supplier. However, since the implementation of the Goods and Services Tax Act in 2017, things have changed a little bit in the pro forma invoice world. This article will take you through the concept of a pro forma invoice and how it has changed ever since GST was put into effect. 

A pro forma invoice is a document that consists of all the information concerning the goods and services which have to be delivered to either the customer or the buyer. It includes all of the particulars concerning the sale of goods and services like the price of the goods, the taxes applicable on them, their cost of shipping, commissions which are due, and the weight of the goods that need to be shipped among others. 

As is implied from the paragraph above, a pro forma invoice is handed out even before the sale has even gone through. If delivery of certain goods has a pending status, the supplier will hand out a copy of the pro forma invoice if a certain customer asks for the same. For example, if a car is yet to be delivered to a customer at an agreed-upon price, that very same number would be mentioned on the proforma invoice. 

Once the car has been delivered to the customer, a final version of the commercial invoice mentioning the exact figure as the one printed on the pro forma invoice would be provided, post which the customer proceeds to make the payment. Majorly, proforma invoices come in handy when the cargo is waiting to be processed further on customs, implying that they are mainly used during the movement of imported and exported goods and products so that the parties involved can ensure a smooth delivery process.

It must be noted that there is no particular law that mandates the issue of a pro forma invoice in the prescribed format by any company or establishment. However, many companies tend to issue a proforma invoice as a part of their process to ensure that the transaction and delivery process go smoothly. 

A proforma invoice mentions a near-to-exact estimate of the actual price of the goods to be delivered to the buyer, in addition to other expenses such as the commissions and charges of delivery, among others.  A pro forma invoice ensures that the buyer or the customer is aware of the upcoming financial commitments which they will have to incur at the time of the delivery of the product(s). 

There have been a few changes to the proforma invoice format after GST. However, one cannot say that the changes to the pro forma invoice format in question or the list of its constituents are drastic in any sense of the term. Let us have a look at the changes:

• GST Pro forma Invoice now consists of the GST number. However, in the Pre-GST era, the Proforma Invoice format consisted of VAT and/or Sales Tax registration numbers.

• GST Pro forma Invoice now even contains information concerning the product’s HSN (Harmonized System of Nomenclature) and the SAC (Service Accounting Code) Codes assigned to the Goods and Services being moved around.

GST Pro forma Invoice also now includes the SGST, CGST, and IGST classification of tax rates, which vary and are based on the nature of supply (Interstate or Intrastate).

While the pro forma invoice and the invoice are often two interchangeably used terms as per many, they are quite different. The final invoice is a commercial document and is, as the name implies, the final copy of the same, whereas a proforma invoice is given prior to the shipment of the discussed goods and services which are to be delivered to the buyer. In the meanwhile, the estimates and purchase order also differ from each other when it comes to who raises them and who it is issued to.