Quotation, Proforma Invoice, Tax Invoice and Receipt: What Is the Difference?

Billing documents are often used interchangeably, and that causes confusion with clients and with the tax office. Each has a different purpose and legal weight. Here is a plain explanation.

1. Quotation (or estimate)

A quotation is an offer. It tells the client what you will provide and at what price before any commitment is made. It is not a demand for payment and it is not used to claim tax credit. Include a validity date, such as "valid for 15 days", scope of work and your terms.

2. Proforma invoice

A proforma invoice looks like an invoice but is a preliminary document. It is used when the client needs something formal to arrange payment, for example to get internal approval, open a letter of credit or make an advance payment. It does not create a tax liability by itself and the buyer cannot claim input tax credit on it. Once the supply happens, you issue the final tax invoice.

3. Tax invoice

This is the official demand for payment for goods or services supplied. For GST-registered sellers it must contain specific details such as GSTIN, HSN or SAC, tax rate and amount, and place of supply. Your customer uses it to claim input tax credit and you use it to report your sales.

4. Receipt

A receipt confirms that payment has been received. It shows the amount, date, payment mode and the invoice it settles. If you receive an advance, issue a receipt voucher for it. Many small businesses combine this by marking the invoice as paid and sharing the updated copy.

Side-by-side comparison

Typical flow for a project

1. Send a quotation with the scope and price.
2. The client accepts. You request an advance with a proforma invoice if needed.
3. Complete the work.
4. Issue the tax invoice, reducing the advance already received.
5. Confirm each payment with a receipt or a paid status.

Credit notes and debit notes

If you need to reduce an invoice after issuing it, for example for returned goods or a discount agreed later, a credit note is the standard tool. A debit note increases the value. Do not simply edit an issued tax invoice.

Keep a separate numbering series

Give each document type its own prefix so that your tax invoice sequence stays clean. For example QT for quotations, PI for proforma, SB for tax invoices.

Related reading

• What a Valid GST Invoice Must Contain: A Practical Checklist for India
• How to Create a Professional Invoice in 7 Steps (With a Freelancer Example)
• Invoice Payment Terms Explained: Advance, Net 7, Net 30 and What to Choose