Customers ask for a "bill", accountants ask for the "invoice", the bank wants a "receipt", and the client wanted a "quotation" first. They are four different documents with four different legal jobs, and using the wrong one causes real problems — from GST notices to unpaid dues you cannot enforce.
One-line definitions
| Document | Issued by | When | Legal effect |
|---|---|---|---|
| Quotation / estimate | Seller | Before the sale | An offer of price; no obligation until accepted |
| Proforma invoice | Seller | After acceptance, before supply | A request for advance / confirmation; not a tax document |
| Invoice (tax invoice) | Seller | At/after supply | Records the sale, creates the debt, carries GST, enables buyer's ITC |
| Bill of supply | Seller (composition / exempt) | At supply | Same as invoice but with no GST shown |
| Receipt | Seller (or anyone receiving money) | When payment is received | Proof of payment; discharges the debt |
| Delivery challan | Seller | Movement without sale | Proof of dispatch; not a sale |
"Bill" in everyday Indian usage means the invoice — and in GST law a "bill of supply" specifically means the non-tax version.
Quotation
A quotation says "we can do X for ₹Y, valid until Z". Include scope, itemised prices, taxes (or "plus GST"), validity, payment terms and exclusions. Once the client accepts in writing, it becomes a contract. The quotation builder produces one with scope-of-work and timeline fields; for goods, the same format works. Full guide: how to write a quotation.
Proforma invoice
Looks like an invoice, says "proforma", and is used to request advance payment or for the buyer's internal approval/import formalities. It has no GST consequence: no liability for you, no ITC for the buyer. Issue the real invoice on supply. Tool: proforma invoice.
Invoice
The invoice is the document that matters legally:
- Creates the receivable — the buyer owes you.
- Under GST, the tax invoice must be issued at supply (goods) or within 30 days (services) with the 16 mandatory fields.
- Reported in GSTR-1; appears in the buyer's IMS; gives them ITC.
- For MSE suppliers, the invoice/acceptance date starts the 45-day payment clock.
Composition dealers and suppliers of exempt goods issue a bill of supply instead, stating that GST is not charged. Tool: GST invoice generator (switch off tax for a bill of supply).
Receipt
A receipt proves money was received: date, amount, mode (UPI/cash/cheque with number), what it is against (invoice number), balance due if any, and signature. Under GST, advance receipts need a receipt voucher; regular payments against an invoice need a plain receipt. Customers keep receipts for warranty and returns; you keep them for reconciliation. Tool: payment receipt with A4 and thermal layouts and a "part paid" stamp.
Decision guide
- Customer asks for a price → quotation
- Customer says yes, you want money up front → proforma invoice (then receipt voucher when the advance arrives)
- You deliver / complete the service → tax invoice (or bill of supply)
- Customer pays → receipt, referencing the invoice
- Customer returns goods → credit note against the invoice (guide)
- Goods move to your own godown or a job worker → delivery challan
Why mixing them up hurts
- Sending a quotation as an "invoice" and reporting it in GSTR-1 creates tax liability for a sale that never happened.
- Treating a proforma as final means no GST-valid document exists; the buyer's ITC is denied.
- Issuing a receipt without an invoice leaves no record of what was sold — a problem in disputes and audits.
- A bill of supply that shows GST (from a composition dealer) is an offence: the tax collected must be deposited and cannot be passed as ITC.
FAQ
Is a "cash memo" an invoice?
A cash memo is a retail invoice-cum-receipt for over-the-counter sales. For GST it must still carry the mandatory fields (B2C invoices under ₹200 can be consolidated daily).
Can an invoice and receipt be one document?
For cash sales, yes — mark it "paid" with the mode and date. For credit sales, keep them separate so the receivable is tracked.
Do freelancers need to issue invoices?
Yes — for every payment received, even without GST registration. It is your proof of income and the client's proof of expense.
Is an emailed PDF invoice valid?
Yes. A digitally generated invoice with the mandatory fields and a signature (or DSC/IRN where applicable) is valid; keep copies for six years.