---
title: "Invoice vs Estimate vs Quotation vs Proforma Invoice: The Difference"
description: "A quotation or estimate is an offer, a proforma invoice is a draft bill, and a tax invoice is the real GST bill. When to use each, with a ₹ example."
canonical_url: "https://billbabu.com/blog/invoice-vs-estimate-vs-quotation-differences"
markdown_url: "https://billbabu.com/blog/invoice-vs-estimate-vs-quotation-differences.md"
type: "blog-post"
language: "en-IN"
published: "2026-05-15"
last_updated: "2026-10-04"
author: "BillBabu Team"
category: "Invoicing"
tags: ["quotation", "estimate", "proforma invoice", "tax invoice", "invoice"]
site: "BillBabu (https://billbabu.com)"
---
# Invoice vs Estimate vs Quotation vs Proforma Invoice: The Difference

By BillBabu Team · Published 15 May 2026 · Updated 4 October 2026 · Category: Invoicing

**In short**

- **Quotation:** a fixed-price offer for specific goods or work. Once the customer accepts it, the price is agreed.
- **Estimate:** your best guess of the cost. The final amount may change.
- **Proforma invoice:** a draft bill sent before the sale, often to collect an advance. It is not a tax invoice.
- **Tax invoice:** the real bill under GST, issued when you supply the goods or services. Your buyer claims input tax credit on this one only.

## The four documents side by side

|   | Quotation | Estimate | Proforma invoice | Tax invoice |
| --- | --- | --- | --- | --- |
| What it is | Firm offer | Approximate cost | Draft bill | Final bill |
| When you send it | Before the order | Before the order | After the order, before supply | At supply |
| Price can change? | Not after acceptance | Yes, within reason | Only by a new proforma | Only by a credit or debit note |
| Needed under GST? | No | No | No | Yes |
| Buyer can claim GST credit? | No | No | No | Yes |

## Quotation vs estimate

In everyday Indian business the two words are used for the same thing, and that is fine for most shops. The difference matters when the final cost is uncertain.

- Send a **quotation** when you know exactly what you will supply: 50 bags of cement at ₹340 a bag, delivery included. If the customer accepts it in writing, a WhatsApp "OK, go ahead" included, you are expected to honour that price until it expires.
- Send an **estimate** when the work may grow: a repair, a fit-out, a custom order. Say clearly that the final bill depends on actual quantities or hours.

Either way, put a validity date on it. Prices of cement, steel or electronics move, and an open-ended quote is an invitation to an argument. Our guide to [quotation terms and conditions](https://billbabu.com/blog/quotation-terms-conditions-template) has lines you can copy.

## Proforma invoice vs tax invoice

A proforma invoice looks like a bill, with items, rates, GST and a total, but it is a promise of a bill, not a bill. Businesses use it to:

- ask for an advance before they buy material or start work;
- let a buyer get internal approval or arrange a bank payment;
- give an importer or a lender the expected value of a deal.

A proforma invoice does not go into your GST return and the buyer cannot claim input tax credit on it. The tax invoice does both. Under GST, you issue the tax invoice when you supply: for goods, at or before delivery; for most services, within 30 days of providing the service.

If you collect an advance against a proforma, check the GST treatment with your CA. For services, GST is generally due when the advance is received; for goods, it is generally due when you invoice.

## Worked example: one order, from quotation to final bill

Verma Hardware in Jaipur gets an enquiry from a contractor in Jaipur for 50 bags of cement. Cement is taxed at 18%, and it is a sale within Rajasthan.

1. **Quotation (1 October):** 50 bags at ₹340 = ₹17,000. CGST 9% ₹1,530 and SGST 9% ₹1,530. Total ₹20,060. Valid for 7 days.
2. **Proforma invoice (3 October):** the contractor accepts and asks for a proforma to release a 50% advance of ₹10,030.
3. **Tax invoice (5 October):** the cement is delivered. Verma Hardware issues a tax invoice for ₹20,060 with its next invoice number, and notes the advance of ₹10,030 already received. The balance due is ₹10,030.

Only step 3 goes into the GST return, and only step 3 lets the contractor claim ₹3,060 of input tax credit.

## Which one should you send?

- A customer asks "how much?" for a known item: **quotation**.
- A job whose size you cannot know in advance: **estimate**.
- The order is confirmed and you want money upfront: **proforma invoice** (or an estimate clearly marked "for advance payment").
- You have delivered the goods or done the work: **tax invoice**, every time.

## How this works in BillBabu

BillBabu has three document types: invoices, estimates and purchase bills. You use an **estimate** for both quotations and estimates. Each estimate gets its own number (EST-2026-0001 style), a valid-until date and a notes box, and you can share it as a PDF on WhatsApp. Its status shows where it stands: Draft, Sent, Accepted, Rejected, Expired or Converted.

When the customer accepts, open the estimate in the BillBabu web app and press **Convert** to turn it into an invoice with the same party and items, so you do not retype anything. Converting is on the web app only for now; on the phone, you create the invoice for the same party and items. The steps are in our guide to [converting an estimate into an invoice](https://billbabu.com/blog/converting-estimates-to-invoices-workflow).

BillBabu does not have a separate proforma invoice document. If you need one to collect an advance, send an estimate and say in the notes that it is for advance payment. More on the estimate side is on our [quotation and estimate software](https://billbabu.com/invoice-estimate-software) page. And if a customer goes quiet after your quote, read [how to follow up without being pushy](https://billbabu.com/blog/how-to-follow-up-quotations-without-being-pushy).

## Frequently asked questions

### Is a quotation legally binding?

A quotation is an offer. Once the customer accepts it, it can form an agreement on that price and those terms, so only quote what you can deliver, and always add a validity date.

### Can a buyer claim input tax credit on a proforma invoice?

No. Input tax credit is claimed on the tax invoice issued at supply, not on a proforma invoice, a quotation or an estimate.

### Should a quotation show GST separately?

It is not required by law, but showing the taxable amount, the GST and the total avoids the most common argument: whether the quoted price included GST.

### Do estimates and invoices share one number series?

They should not. Invoices need their own continuous series under GST. Estimates can have a separate series; in BillBabu, estimates are numbered EST-… and invoices INV-….

**Quote, convert and bill without retyping.** BillBabu is a GST billing app for Android, with a web app at app.billbabu.com. Make GST invoices and estimates, share them as PDFs and see who still owes you money. Every account starts with a 14-day free trial, and you do not need a card. [Get BillBabu on Google Play](https://play.google.com/store/apps/details?id=com.billbabu.app) or see [plans and prices](https://billbabu.com/pricing).

## Related guides

- [Tax Invoice Cancellation Under GST: 24-Hour IRP Window and Credit Notes](https://billbabu.com/blog/tax-invoice-cancellation-gst-india): Tax invoice cancellation under GST: 24-hour IRP cancellation window, credit note approach beyond that, and GSTR-1 amendments.
- [Consolidated Invoice Under GST: Rule 46A and B2C Daily Billing](https://billbabu.com/blog/consolidated-invoice-gst-rule-46a): Consolidated invoice under GST Rule 46A: when retailers can issue one daily summary for B2C sales under Rs. 200 and how to file GSTR-1 Table 7.
- [GST Invoice Format for Freelancers and Service Providers (with SAC Codes)](https://billbabu.com/blog/freelancer-invoice-format-india): What a freelancer's or service provider's invoice must show in India, with GST and without it. Includes common SAC codes, how place of supply works for services, a filled ₹ example and a note on TDS.

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