April 23, 2024


Savvy business masters

5 differences between Proforma Invoice and Tax Invoice

Are you confused about the difference between a proforma invoice and a tax invoice? Don’t worry, because you are in the right place. In this article, we are going to discuss what a proforma invoice and tax invoice are, in addition to that we are also going to talk about their distinctive features.

Follow the link to know more about proforma invoices.

What is Proforma Invoice?

You want to buy a specific product but first, you ought to know its estimated cost along with other details like shipping cost (if you receive it as a shipment), taxes, terms and conditions, the weight of the shipment, etc. The seller will provide you with a proforma invoice. Through this bill, you will get to know all the necessary constituents about the product.

For sellers, there is no specific format to follow while creating a proforma invoice for their clients. Sellers only need to provide applicable details in this bill. They also need to keep in mind while providing the information, it is necessary to include relevant details for the customs department to set charges after thoroughly examining the shipment. The use of a proforma invoice is mostly applicable in import-export trades.

Before the official transaction takes place between a buyer and a seller which is going to be registered in the accounting book for record-keeping, a proforma invoice is sent to the customer by the supplier.

What is a Tax Invoice?

The Tax Invoice is an officially registered document through which a transaction takes place between a buyer and a seller. The details of the tax charges, commission, product value, shipment charges, description, quantity and services are shown by the seller.

Tax invoice format

The following details must be mentioned in a tax invoice:

  • Must contain the words “Tax Invoice”
  • Invoice number
  • Date of Issue
  • Price per unit
  • Payment details
  • Quantity of Goods and Services
  • Total Amount including tax
  • Tax charges per item
  • Tax identification number
  • Name, address and contact details of the supplier
  • Name, address and contact details of the consumer

The bills are sent to relevant tax offices at the end of the fiscal year.

Traders also need to remember that invoices and receipts are two different types of documents. A receipt is a financial document issued by a seller to its potential buyer or customer after the payment has been made. But in the case of an invoice, it is the exact opposite, i.e, an invoice is issued by the supplier before the payment. An invoice is a form of a payment request from the buyer’s side whereas a receipt is the details of the goods and services already paid for.

5 Differences between a Proforma Invoice and a Tax Invoice

There are few differences between a proforma invoice and a tax invoice that we need to keep in mind during a financial transaction. These are the following:

  • A proforma invoice gives detailed information about the particulars of the goods, tax charges, shipment charges, commissions, etc. including the details of the supplier or the service provider. A tax invoice is a registered financial document containing all the minute details of the product and services after the delivery of the commodity or the service.
  • A proforma invoice is a form of a quotation whereas a tax invoice is a registered bill.
  • A proforma invoice is generated before the buyer orders the product or service. A tax invoice is issued after the placement of the order has been made.
  • A proforma invoice is an attempt to sell, a tax invoice, on the other hand, a tax invoice is the confirmation of the sale.
  • The entry of the tax invoice is made in the account books, whereas the details of the proforma invoice are not entered due to the reason it is not a true invoice.

Having the aforementioned points and differences in mind, one can effectively use both invoices when needed. It is extremely important to keep in mind where the invoices are used so as to avoid confusion and manage transactions without any hassle.