YMYL disclosure: Educational estimates only, not tax, financial or legal advice. GST, VAT, ITC and customs rules vary by jurisdiction and change via official notification. Confirm with your CA or tax professional before filing. See Disclaimer.
Bottom line: A quotation sells the work, a proforma invoice gets it paid or shipped — neither is a tax invoice. I use quotations to lock scope, price and 15-day validity, then issue a proforma only when a client needs to release advance or clear export customs. In India both carry no ITC until you convert to a tax invoice. Build the first offer in the quotation generator as QT-2026-0187.
Definitions that end confusion
Teams mix these two because both show prices in a PDF. A quotation is a priced offer before the buyer agrees. A proforma invoice is a pre-invoice request after interest but before supply.
What a quotation really is
A quotation states what you will do, how much, for how long that price holds, and under what payment terms. It carries a quotation number like QT-2026-0187, issue date, validity days, line items with quantity x rate, subtotal, indicative tax split and grand total. My L1 rule still holds: 15 days for services, 7 days for material-heavy shops, plus 50% advance footer.
What a proforma invoice really is
A proforma mimics an invoice layout but must say Proforma Invoice — Not a Tax Invoice on top. Its jobs are narrow: request advance payment, let a buyer raise a purchase order, support a letter of credit, declare customs value for export. It carries a separate proforma number like PI-2026-0187 and shows estimated tax for information only.
- Offer vs request: quotation proposes, proforma asks for money or approval
- Timing: quotation first, proforma only after in-principle yes
- Numbering: QT sequence and PI sequence run separately, voids logged
- Tax effect: both show tax for transparency, neither posts to returns
Side-by-side comparison table
Use a quotation to compete and negotiate. Use a proforma to formalise intent and move money or goods before the final tax invoice.
| Dimension | Quotation shows | Proforma invoice shows |
|---|---|---|
| Purpose | Offer to win work, sets scope and price | Request for advance, approval or customs |
| When issued | Before agreement, with 7-15 days validity | After interest, before supply or shipment |
| Legal force | Binding only on written acceptance | Not supply proof, needs tax invoice later |
| Numbering | QT-2026-0187, sequential, never reused | PI-2026-0187, separate run, links to QT |
| Tax display | Indicative GST or VAT for decision | Estimated tax, no ITC or VAT reclaim |
| Payment link | States 50% advance to start, Net 7 or 14 | Gives bank, UPI or wire to collect advance |
| Next document | Proforma or sales order on yes | Sales order then tax invoice on supply |
| Common error | No expiry, shopped around | Titled Invoice, buyer claims credit wrongly |
Tax: GST vs VAT on each
India: no ITC on quotation or proforma
Under CGST law, input tax credit needs a tax invoice with supplier GSTIN, invoice number, buyer GSTIN, HSN or SAC, place of supply and CGST/SGST or IGST split. A quotation and a proforma fail that test by design. They do not appear in GSTR-1 and cannot appear in GSTR-2B. I write Estimated GST — Not for ITC in the footer.
Global: customs yes, VAT reclaim no
US, UK and EU customs accept a marked pro-forma to assess customs value, HS code and Incoterms before the commercial invoice exists. But a pro-forma is not a VAT invoice and cannot support VAT reclaim or reverse charge accounting. A UK B2C proforma may show 20% VAT estimate, a US one Austin 8.5% sales tax, all for payment planning.
| Tax question | Quotation answer | Proforma answer | Tax invoice answer |
|---|---|---|---|
| India ITC allowed | No, indicative GST only | No, no GSTR-2B | Yes, with GSTIN and Section 31 fields |
| GST returns | Not reported | Not reported in GSTR-1 | Reported in GSTR-1, drives 2B |
| Global VAT reclaim | No | No, customs only | Yes, with VAT ID and VAT number |
| Customs use | Weak, no value declaration | Strong, for duty and LC | Final commercial invoice on shipment |
| Must print | Valid till date plus scope | Proforma — Not a Tax or VAT Invoice | Tax Invoice plus IRN where applicable |
When to use which (with flow)
- Inquiry to quotation: Send QT with lines, tax estimate, validity and pay-to-start step same day
- Negotiation stays on quotation: revise scope, keep same QT number with R1 suffix or re-issue fresh QT
- Need advance to proforma: clone QT to PI with same lines and bank details
- Commit to sales order: record promise in sales order generator, buy materials via purchase order generator if needed
- Supply to tax invoice: issue tax invoice in the invoice generator and receipt on payment
Conversion path to tax invoice
- Lock acceptance in writing: Accepted QT-2026-0187 by email counts
- Raise PI only if needed: PI-2026-0187 mirrors QT lines, advance 50% Rs 23600, balance Net 7
- Create sales order: SO-2026-0187 confirms SKU, quantity, promise date
- Issue tax invoice on supply: INV-2026-0188 same subtotal and tax split, plus GSTIN and HSN
- Close the loop: receipt same hour, file QT plus PI plus SO plus INV plus receipt in one folder
Next steps to L1 + convert-to-invoice + PO vs SO
- Master the offer: quotation generator guide (L1) for numbering, validity and maths
- Bill correctly: on acceptance build the final bill in the invoice generator as INV-next-number
- Keep direction straight: purchase order generator for buying, sales order generator for promising. Full logic in PO vs SO guide
- Weekly hygiene: void expired QTs, chase day-3 and day-10 opens, convert accepted QTs within 24 hours