Send a quotation when the client is still deciding, a proforma invoice when they've agreed and you want an advance, and a GST tax invoice when the supply happens or the law says it's due. Under GST, only the tax invoice (plus a receipt voucher for some advances) counts. Quotations and proformas are business documents. They don't go into GSTR-1, and your client can't claim input tax credit on them.
That's the short answer. Below, we go through each stage of a deal, explain how advances work, and show how to number and convert your documents so your CA isn't fixing them at month-end.
Quotation, proforma and tax invoice at a glance#
| Quotation | Proforma invoice | Tax invoice | |
|---|---|---|---|
| Purpose | Offer a price | Ask for payment or advance | Record the actual supply |
| Legal document under GST? | No | No | Yes |
| Goes into GSTR-1? | No | No | Yes |
| Client can claim ITC on it? | No | No | Yes, if all conditions are met |
| Numbering | Your own series (e.g. QT-) | Separate series (e.g. PI-) | Consecutive GST series, unique per financial year |
| Can it change? | Yes, freely | Yes, until the deal is final | No. Fix it with a credit or debit note |
Many owners think a proforma is just a "soft" tax invoice. It isn't. A proforma is a request for payment that looks like an invoice. Until you raise a real tax invoice, or a receipt voucher where one is needed, GST hasn't been recorded properly.
Which document to send at each stage of a deal#
Let's follow a typical deal. A design agency in Pune is building a website for a client in Mumbai. The fee is ₹2,00,000 plus GST, with 50% upfront.
- Client asks "how much?" Send a quotation: scope, deliverables, price, GST shown separately, validity (say 15 days) and payment terms. You can revise it as many times as you like.
- Client says yes and asks for bank details. Send a proforma invoice for the advance. It shows the amount due, GST, and your bank or online payment details. Mark it clearly as "Proforma Invoice – not a tax invoice".
- Advance arrives. For services, issue a receipt voucher and account for GST on the advance (more on this below).
- Work is delivered, or a milestone is complete. Raise the tax invoice and adjust the advance against it.
- Something changes after invoicing (discount, cancelled scope). Issue a credit note. Don't edit the old invoice.
For a small manufacturer, the order is the same. A parts maker in Ludhiana quotes a buyer in Ahmedabad. The buyer confirms, a proforma goes out for the 30% advance, and the tax invoice is raised on or before dispatch. Because this is an interstate sale, it carries IGST.
Taking an advance: what GST says#
This is where most mix-ups happen. The rules for services and goods are different.
Advance for services. For services, GST generally becomes payable when you receive the advance, even if you haven't invoiced yet. You issue a receipt voucher showing the amount and the tax, and report it in GSTR-1 for that month. When the final tax invoice is raised, you adjust the advance so the tax isn't paid twice.
In our Pune example, the client pays ₹1,18,000 (half of ₹2,36,000). Both parties are in Maharashtra, so the receipt voucher shows:
- Taxable value: ₹1,00,000
- CGST 9%: ₹9,000
- SGST 9%: ₹9,000
If the payment comes in round, say a flat ₹1,00,000 with no GST added, the tax is usually worked out backwards from that amount, treating it as GST-inclusive. Ask your CA how they want you to handle this.
Advance for goods. Under the current notification, most regular taxpayers don't pay GST on advances received for goods. Tax is due when the invoice is raised, which is at or before delivery. So the Ludhiana manufacturer collects the advance against the proforma and charges GST on the tax invoice at dispatch. Composition dealers and special cases can work differently, so confirm with your CA.
If the deal is cancelled after an advance. For services where you've already shown GST on a receipt voucher, you issue a refund voucher when you return the money. That way the tax you paid can be adjusted.
When the tax invoice has to be raised#
A proforma doesn't stop the clock. The tax invoice is due based on the supply, not on when the client pays.
- Services: generally within 30 days of the service being supplied. Some sectors, such as banks and financial institutions, get a longer window. For long projects billed in milestones, the invoice is usually due when each milestone payment falls due under the contract.
- Goods: at or before removal or delivery of the goods.
- Continuous supply (monthly retainers, AMC contracts): usually on or before the due date in the contract, or when payment is received.
A common mistake at agencies: sending proformas month after month for a retainer while the client "processes payment", and never raising a tax invoice. If the service has been delivered, the tax invoice is due whether or not the money has come in. Waiting for payment before invoicing can mean paying GST late, with interest.
Also check whether e-invoicing applies to you. Above a certain turnover, B2B tax invoices must be reported to the Invoice Registration Portal to get an IRN. The limit has come down over the years, so check the current limit on the GST portal.
Numbering and converting documents so GSTR-1 stays clean#
Most messy GSTR-1s come from numbering. Keep it simple:
- Use three separate series. For example
QT/25-26/001,PI/25-26/001andINV/25-26/001. Never let proformas use your tax invoice series. If they do, you'll have gaps or cancelled numbers in GSTR-1. - Tax invoice numbers must be consecutive and unique within the financial year. They can include letters, numbers,
-and/, up to 16 characters. Many businesses restart the series every April. - Receipt and refund vouchers need their own series too. GSTR-1 asks for a summary of documents issued, including cancelled ones.
- Link each document to the one before it. Write "Ref: QT/25-26/014" on the proforma, and the proforma and receipt voucher numbers on the tax invoice. When a client says "we paid against PI-022", you'll find it in seconds.
- Convert, don't retype. Retyping a quote into an invoice is how GSTINs, HSN/SAC codes and amounts go wrong. Copy the line items forward, then check the place of supply and tax type before you finalise.
- Once issued, a tax invoice is final. Changed price? Issue a credit or debit note. Wrong invoice? Cancel it in your records and keep the number in your document summary. Don't reuse it.
A quick monthly checklist before your CA files:
- Every advance received for services has a receipt voucher.
- Every receipt voucher is either adjusted against a tax invoice or still open, and you know which.
- No proforma numbers have crept into the invoice register.
- Tax invoice numbers have no unexplained gaps.
If you manage this in spreadsheets, it works until you have a dozen open projects. In Clyrix invoicing, a quote on a project becomes a GST-ready invoice with CGST/SGST/IGST shown separately. Payments, including advances collected through Razorpay links, are recorded against the same project. You can export GSTR-1 data for your CA. The 14-day free trial needs no card if you want to try it on a real deal.
The rule of thumb#
- Quotation: "Here's what it will cost." No GST impact.
- Proforma invoice: "Please pay this." No GST impact on its own.
- Receipt voucher: "We got your advance." Needed for service advances, where GST is usually payable.
- Tax invoice: "We supplied this." This is the document that counts for GST and ITC.
Send the right one at the right stage, keep separate number series, and link each document to the next. Your client gets clear paperwork, you get paid faster, and your CA gets a GSTR-1 that matches your books.
