Quotation vs Proforma Invoice vs Tax Invoice: What's the Difference?

A client asks for "a quote". You send something. They ask for "a proforma for approval". You send roughly the same thing with a different heading. Later someone in accounts asks for "the actual invoice".

All three documents can list the same items at the same prices. What separates them is what each one commits you to, and when GST becomes payable — and that difference is worth understanding, because sending the wrong one can either cost you a sale or create a tax liability before you've been paid.

The short answer

	Quotation	Proforma invoice	Tax invoice
Purpose	Offer a price	Confirm the deal before supply	Demand payment for a completed supply
Stage	Before the deal	Deal agreed, not yet supplied	At or after supply
Legally binding?	No — an offer	No — still not a demand	Yes
Creates GST liability?	No	No	Yes
Can the buyer claim ITC?	No	No	Yes
Goes in your GSTR-1?	No	No	Yes
Defined in GST law?	No	No	Yes (Section 31, Rule 46)

The two on the left are commercial documents. Only the one on the right is a tax document.

Quotation

A quotation is an offer: this is what the work costs, on these terms, valid until this date.

It's the first formal number a prospect sees, so it usually carries more than just a price — scope, assumptions, delivery timelines, payment terms, and a validity period.

Send one when: someone has asked what something costs and hasn't committed.

Key points:

• Always put a validity date on it. Without one, a quote you sent eight months ago is arguably still live — awkward if your costs have moved.
• A quotation is an offer, not a contract. It becomes binding when the client accepts it.
• Taxes are usually shown as indicative, since the rate that applies is the one in force at the time of supply, not the time of quoting.

That last point stopped being theoretical in September 2025, when the slabs changed — GST 2.0 retired the 12% and 28% brackets, and any long-dated quote written before that carried numbers that no longer applied.

Proforma invoice

A proforma invoice is a commitment document: the deal is agreed, here is exactly what will be supplied and what it will cost, before anything actually moves.

It looks almost identical to a tax invoice — same line items, same tax breakup, same total. The difference is that nothing has been supplied yet, so it is not a demand for payment, and it has no standing under GST.

Send one when:

• The buyer needs a document to raise a purchase order or get internal approval
• You want an advance payment before starting
• Customs, a bank, or an import/export process requires a declared value up front
• The client's finance team needs paperwork before releasing funds

What it does not do — and this is the part people get wrong:

• It does not create a GST liability. Issuing a proforma does not mean you owe tax on it.
• The buyer cannot claim input tax credit against it.
• It does not belong in your GSTR-1. It isn't a supply.
• It should not use your tax-invoice number series. Keep a separate series so your invoice numbering stays unbroken — a requirement under Rule 46.

Label it clearly as "Proforma Invoice". A document headed "Invoice" that isn't one causes real confusion in a buyer's accounts department.

Tax invoice

This is the legal document. It says a supply has happened (or is happening now) and payment is due.

Issuing it has consequences:

• GST becomes payable. The tax goes into your return for that period whether or not the client has paid you.
• The buyer can claim input tax credit — which is why they care so much that it's correct.
• It appears in your GSTR-1 and must match what the buyer reports.
• It must satisfy Rule 46 — 16 mandatory fields, a sequential number, both GSTINs, place of supply, HSN/SAC codes and the right CGST+SGST or IGST split. Here's the full checklist.

There are also deadlines: for goods, before or at removal; for services, within 30 days of supply. You don't get to defer the invoice to defer the tax.

The normal sequence

For most B2B work it runs:

1. Quotation — "here's what it would cost"
2. Client accepts
3. Proforma invoice — "here's the confirmed order; raise your PO / release the advance"
4. You do the work or ship the goods
5. Tax invoice — "this is done, here's the bill, and here's your ITC"

Not every deal needs all three. A small repeat order might go straight to a tax invoice. A large first-time contract might need all three plus a signed agreement.

The one thing to be deliberate about is step 5. The tax invoice is the point at which the liability attaches, so it should be issued when the supply actually happens — not early to look organised, and not late to delay the tax.

Practical habits worth adopting

• Separate number series. QUO-2026-001, PI-2026-001, INV-2026-001. Your tax invoice series must be unbroken; mixing document types into one series is how it breaks.
• Convert, don't retype. Re-entering line items at each stage is where quantities and rates quietly drift apart. CredHill converts a quotation into a proforma or a tax invoice with the items, taxes and client details carried over.
• Watch the rate at supply time. The applicable GST rate is the one in force when the supply happens, not when you quoted.
• Save your clients and items once. Storing GSTINs in a client list and HSN codes with rates in an item master removes the two fields people most often get wrong under time pressure.

In one line

A quotation offers a price. A proforma confirms the deal. A tax invoice is the only one of the three that GST recognises — it creates your liability and the buyer's credit, so it's the one that has to be exactly right.

Not tax advice. A practical summary, not a substitute for a chartered accountant on anything unusual — advances, exports, reverse charge or continuous supply.