Tax invoice vs bill of supply vs proforma invoice: which one to issue and when

A tax invoice is the document a GST-registered business issues for taxable supplies, and it is the only document that lets your buyer claim input tax credit. A bill of supply is what composition dealers and suppliers of exempt goods issue, with no tax shown. A proforma invoice is a quotation in invoice format with no legal standing under GST. This post explains each, along with receipt vouchers, delivery challans and export invoices.

Why the name on the document matters

Under GST, each type of document has a defined purpose, defined contents and a defined effect on your returns. Issue the wrong one and you can end up charging tax you were not allowed to collect, denying your customer credit they were entitled to, or reporting a supply that has not happened yet. Section 31 of the CGST Act, together with Rules 46 to 55, tells you which document goes with which situation.

Small businesses most often mix up three of them: the tax invoice, the bill of supply and the proforma invoice. Add receipt vouchers, delivery challans and export invoices and there are six documents you may need in a normal trading year. Here is what each one is for.

Tax invoice: the document that carries GST

A tax invoice is issued by a registered person for a taxable supply of goods or services under Section 31(1) and (2). It shows the taxable value, the rate and the amount of CGST and SGST (or IGST), and it is the document your buyer uses to claim ITC. The mandatory contents are in Rule 46 and are covered field by field in how to make a GST invoice.

You issue a tax invoice when:

• you are a regular (non-composition) registered taxpayer, and
• the supply is taxable at 5%, 12%, 18%, 28% or any other positive rate, including zero-rated exports.

If a single invoice covers both taxable and exempt items to an unregistered buyer, Rule 46A lets you issue an "invoice-cum-bill of supply" rather than two documents.

Under Rule 47, services must be invoiced within 30 days of supply; goods must be invoiced at or before removal. A tax invoice is reported in GSTR-1, creates output tax liability in GSTR-3B, and appears in the buyer's GSTR-2B.

Bill of supply: when no tax is charged

A bill of supply, under Section 31(3)(c) and Rule 49, is issued in place of a tax invoice when you are not allowed to collect tax from the buyer. That happens in two cases:

1. You are a composition dealer. You pay tax at a flat rate from your own pocket and cannot pass it on. Your bill must state "composition taxable person, not eligible to collect tax on supplies". More on the scheme in GST composition scheme explained.
2. The supply is exempt or nil-rated. For example, a grocer selling unbranded atta, or a school supplying education services.

A bill of supply looks like a tax invoice with the tax columns removed. It still needs your name, address, GSTIN, a unique serial number, date, the buyer's details if registered, HSN or SAC, description, value and a signature. Like a tax invoice, it can be skipped for sales below ₹200 to unregistered buyers who do not ask for one.

A registered buyer cannot claim ITC on a bill of supply because there is no tax on it. Businesses that buy from composition dealers should factor this in when comparing prices: a ₹1,000 purchase from a composition dealer costs ₹1,000 with no credit, while ₹1,000 plus ₹180 GST from a regular dealer costs ₹1,000 after the credit.

Proforma invoice: a quotation wearing an invoice's clothes

A proforma invoice is a document sent before the supply that shows what the final invoice will look like: items, quantities, prices, tax and total. It is commonly used to:

• let the buyer raise a purchase order or arrange funds,
• support an import or export bank transaction or letter of credit,
• give a customs authority an estimated value before shipment, or
• ask for an advance payment.

The GST law does not mention proforma invoices at all. That has three consequences. First, a proforma invoice does not create a supply, so no tax is payable merely because you issued one. Second, it does not go into GSTR-1. Third, the buyer cannot claim ITC on it, however much tax it shows.

Give proforma invoices their own numbering series (PI/26-27/0012) so they never collide with your tax invoice series, mark them clearly as "Proforma invoice, not a tax invoice", and add a validity period. When the buyer confirms, convert it into a tax invoice with a new number in the tax invoice series. The full quote-to-cash sequence is in quotation to invoice workflow.

A proforma invoice is not a receipt voucher either. If the buyer pays an advance against it, the receipt voucher is a separate document, as explained next.

Receipt voucher, refund voucher and payment voucher

These three vouchers cover money moving without a tax invoice.

Receipt voucher (Rule 50). When you receive an advance before making a supply, Section 31(3)(d) requires a receipt voucher showing the amount, the rate and amount of tax, and the place of supply. For services, GST is payable on the advance in the month you receive it. For goods, Notification 66/2017-Central Tax exempts most registered persons from paying tax at the advance stage, so the tax is paid when the invoice is issued. If the rate or the nature of the supply is not yet known, Rule 50 says treat it as 18% and inter-state until the invoice clarifies it.

Refund voucher (Rule 51). If you took an advance, issued a receipt voucher and then the supply did not happen, you return the money with a refund voucher and adjust the tax you had paid.

Payment voucher (Rule 52). When you are the one paying tax under reverse charge (for example, a registered business paying an unregistered goods transport agency or a lawyer), you issue a payment voucher at the time of payment to the supplier. It is your own evidence for the RCM liability and the ITC you take on it.

Receipt vouchers are different from ordinary payment receipts you hand to a customer after they settle a tax invoice. Those receipts are good practice but not a GST document; see payment receipt best practices.

Delivery challan: goods moving without a sale

A delivery challan under Rule 55 accompanies goods that move for reasons other than a sale: sending material to a job worker, moving stock between your own branches within a state, sending goods on approval, or shipping a machine in parts. It shows quantity, description, HSN and value, and tax where applicable, but it is not an invoice and does not by itself create a supply. If the goods are eventually sold, a tax invoice follows.

Challans have their own rules on copies, contents and when they can replace an invoice during transit, covered in delivery challan: when to use it.

Export invoice: with IGST or under LUT

Exports are zero-rated supplies under Section 16 of the IGST Act. You still issue a tax invoice under Rule 46, but with two additions: an endorsement stating the export route, and the destination country. The two routes are:

The letter of undertaking is filed online in Form GST RFD-11 each financial year and is valid for that year. Most small exporters use the LUT route because it avoids blocking cash in IGST. A commercial invoice for customs and the buyer, with eight-digit HSN, currency, Incoterms and shipping details, is usually a separate document from the GST tax invoice, though many exporters combine the two.

Comparison at a glance

A worked example: Jaipur handicrafts exporter

Rang Mahal Crafts in Jaipur makes hand-block-printed bedcovers. In one week in June 2026 it issues four different documents.

Monday, a proforma invoice to a buyer in Berlin for 500 bedcovers at ₹1,200 each, total ₹6,00,000, valid for 15 days. No tax, no GSTR-1 entry.

Wednesday, a receipt voucher when the Berlin buyer pays a 30% advance of ₹1,80,000. Because this is an export of goods under LUT, no IGST is payable on the advance; the voucher records the amount and the LUT reference.

Thursday, a bill of supply for ₹8,500 of exempt handloom-related items sold to a Jaipur school, because those particular items are nil-rated. No tax shown.

Friday, a tax invoice to a Delhi retailer for 100 bedcovers at ₹1,200, taxable value ₹1,20,000. Textiles of this kind attract 5% IGST on the inter-state sale: ₹6,000, invoice total ₹1,26,000. This one carries the Delhi retailer's GSTIN and place of supply Delhi (07), and it will show up in the retailer's GSTR-2B so they can claim ₹6,000 as ITC.

When the export ships in July, Rang Mahal issues an export tax invoice for ₹6,00,000 endorsed "under LUT without payment of integrated tax", adjusts the ₹1,80,000 advance, and reports it in Table 6A of GSTR-1. The GST rate on textile items should be confirmed against the current schedule, which changed in September 2025.

Common mistakes

1. Charging GST on a bill of supply as a composition dealer. This is illegal collection of tax; the amount has to be deposited with the government and a penalty applies under Section 76.
2. Treating a proforma invoice as a sale in your books. Revenue is recognised when the tax invoice is issued, not when the proforma is sent.
3. Reusing the proforma number for the tax invoice. Keep separate series; GSTR-1 needs your tax invoice numbers to be consecutive and unique.
4. Skipping the receipt voucher on advances for services and then paying GST only when the invoice is raised. The tax was due in the month of the advance, so interest at 18% per annum runs from then.
5. Issuing a delivery challan for a normal sale to postpone the invoice. Rule 55 covers specific situations; a plain sale needs a tax invoice at removal.
6. Forgetting the LUT renewal on 1 April. An expired LUT means exports after that date are technically on payment of IGST.
7. Missing the words "composition taxable person" or the export endorsement. Both are mandatory text, not optional.

How VyaparKit helps

VyaparKit has a separate template for each document so you never have to strip fields out of the wrong one: tax invoice with automatic CGST, SGST or IGST split, proforma invoice with its own series and validity date, non-GST invoice for bills of supply and unregistered businesses, and commercial invoice for export paperwork. A proforma converts to a tax invoice and then to a payment receipt without re-typing. VyaparKit does not file LUTs or returns, and it does not generate e-invoice IRNs.

Next steps

• Write down which of the six documents your business actually needs and set up a numbering series for each.
• If you are on composition, check that your bill of supply carries the mandatory wording.
• If you export, confirm your LUT for FY 2026-27 is filed and note its ARN on every export invoice.
• Review last quarter's advances from service clients and confirm a receipt voucher and GST payment exist for each.