Proforma invoice, quotation, tax invoice and delivery challan
A quotation is an offer, a proforma invoice is a request for advance payment, a tax invoice is the document that creates the tax liability, and a delivery challan moves goods without a sale. Only the tax invoice triggers GST.
Four documents, similar layouts, entirely different consequences. Businesses use them interchangeably and then wonder why their GST return shows revenue they have not received, or why a customer treats a quotation as a commitment.
Quotation
An offer. You are telling a prospective customer what you would charge if they said yes.
It carries no tax, creates no liability, and is not a demand for payment. Its only job is to be accepted or declined.
Two things belong on one that people leave off. A validity period — without one, a quotation issued in March can be waved at you in November after your costs have moved. Thirty days is a normal default. And an explicit scope, because the argument you will eventually have is about what was included, not about the price.
Number your quotations in their own series, separate from invoices. When a quotation is accepted, referencing its number on the invoice is what lets both sides match the document to the agreement.
Proforma invoice
A request for payment before you supply. It looks like an invoice, is laid out like an invoice, and is not one.
It creates no tax liability, does not go into your returns, and does not go into your customer’s books as a payable. Its job is to let a customer’s system release money before delivery — which many procurement processes need, because they cannot pay against a quotation.
Mark it clearly as Proforma Invoice. Do not put it in your tax invoice series; use a separate series or no series at all. Do not show it as a tax invoice with a GSTIN and a tax split, because a document that looks like a tax invoice may be treated as one.
When payment arrives against a proforma, you issue the actual tax invoice. That is the document that goes into your returns.
There is a wrinkle worth knowing. Under section 13, the time of supply for services can be the date of receipt of payment where that comes first. Receiving an advance can create a liability before you have supplied anything, and the rules around advances have changed for goods and services at different times. If advances are a regular part of your business, get the treatment confirmed rather than assuming the proforma insulates you.
Tax invoice
The document that matters. It creates your tax liability and your customer’s input tax credit. It has to carry the sixteen particulars in Rule 46, it has to be numbered consecutively within the financial year, and it has to be issued within the deadline — at or before removal for goods, within thirty days of supply for services.
The most common mistake is issuing a proforma, receiving payment, and never issuing the tax invoice because the money already arrived. The customer then has no document to claim credit against, and your books show a receipt with nothing behind it.
Delivery challan
Moves goods without a sale.
Used for job work, for goods sent on approval, for stock transferred between your own branches, and for equipment sent out and coming back. Rule 55 sets out what it must contain.
It carries no tax because there is no supply. Where the goods later become a sale, a tax invoice follows and references the challan.
The reason it exists is practical: goods in transit need a document, and inventing an invoice for a movement that is not a sale creates a liability out of nothing. If you send material to a job worker on an invoice, you have recorded a sale you did not make.
Bill of supply
The fifth document, which belongs in this list even though it is not usually confused with the others.
A bill of supply is issued instead of a tax invoice when the supply is exempt, or when you are registered under the composition scheme. It carries most of the same particulars but no tax. A composition dealer’s bill of supply must state that they are not eligible to collect tax.
A clinic providing exempt healthcare services issues bills of supply, not tax invoices. Issuing the wrong one is a compliance problem to unwind even where no tax was wrongly charged.
Quick reference
| Document | Creates tax liability | Demands payment | Goes in your returns |
|---|---|---|---|
| Quotation | No | No | No |
| Proforma invoice | No | Yes, in advance | No |
| Tax invoice | Yes | Yes | Yes |
| Delivery challan | No | No | No |
| Bill of supply | No, supply is exempt | Yes | Yes, as exempt |
Keep the series separate
The single practical habit that prevents most of this confusion: give each document type its own numbering series and its own template. QT/2026-27/012 cannot be mistaken for INV/2026-27/012, and a customer holding the first one cannot reasonably claim to be holding the second.
Multiple series are explicitly permitted, as long as each is itself consecutive and unique within the financial year. Our numbering tool will check any format you want to run.
This is a general explanation, not tax advice. The treatment of advances in particular has moved over time and differs between goods and services. Confirm your position with your accountant.