Which Document Do You Actually Need?

Five documents. They carry similar information, people use the words interchangeably, and the difference only becomes obvious when something goes wrong. Here is what each one actually does.

The short version

Document	Sent when	Says
Quotation	Before the customer agrees	“This is what it would cost”
Proforma invoice	After they agree, before you supply	“This is what it will cost, here is the breakdown”
Tax invoice	When you supply	“You owe this, and this much is GST”
Delivery challan	With the goods	“This is what is in the vehicle”
Payment receipt	When money arrives	“We received this from you”

The single most important line in that table is the third one. Only the tax invoice creates a tax liability and lets your customer claim input credit. The other four do not, whatever they look like.

Quotation

A price offer. Nothing is owed by anyone, and you can withdraw it.

Two things make a quotation useful rather than decorative. Put a validity date on it, so a price you quoted in September does not get accepted in March at the same rate. And itemise it, so when the customer asks for “the same but without the second item” you are not rebuilding it from memory.

Proforma invoice

The one people get most wrong. A proforma looks like an invoice, totals like an invoice, and is not an invoice. It is a commitment of what you are about to bill, usually sent so the buyer can raise a purchase order, arrange payment, or open a letter of credit.

It does not go in your GST returns. Your customer cannot claim input credit on it. If you send a proforma and never follow it with a tax invoice, as far as GST is concerned you never billed anybody.

Mark it clearly as a proforma. A document that says “Invoice” at the top and is not one causes real confusion in the buyer’s accounts department.

Tax invoice

This is the document that matters. It is what puts the supply on record, what your customer needs to claim input credit, and what your returns are built from.

Because it does that work, the law prescribes what has to be on it — supplier and recipient details with GSTIN, a serial number unique within the financial year, date, HSN or SAC, description, quantity, taxable value, the tax split and the total. A missing field is not a formatting problem; it can cost your customer their input credit, which is how you find out about it. A bill book is fine if it carries every one of them: see How to Make a Handwritten GST Invoice.

Delivery challan

Travels with the goods. It exists so that what is in the vehicle can be checked against paper, and so the person receiving can count what arrived before anybody argues about it.

Use one when goods move without a tax invoice — stock to your own branch, material to a job worker, goods sent on approval — and alongside the invoice when the load is going a distance and somebody might stop it.

Payment receipt

Confirms money arrived. Not that goods were supplied, not that tax was charged — only that a specific amount was received on a specific date by a specific method.

This is the one small businesses skip most often, and it is the cheapest insurance you will ever issue. A numbered receipt with the amount in words settles in ten seconds an argument that otherwise takes an afternoon of scrolling through bank statements.

The order it usually runs in

1. Customer asks. You send a quotation.
2. They agree in principle. You send a proforma so they can raise a PO or arrange payment.
3. You ship. A delivery challan goes with the goods.
4. You supply. You issue the tax invoice.
5. They pay. You issue a payment receipt.

Not every job needs all five. Most need three.

The mistake that costs money

Treating a proforma as an invoice. It happens when someone sends a proforma, gets paid, and never raises the tax invoice — the money is in, so the job feels finished.

It is not. The supply is unrecorded, the tax is unaccounted, and the customer has paid for input credit they cannot claim. They will notice at their year end, and you will be reissuing paperwork for a job you finished months ago.