What is the Meaning of Proforma Invoice?

Pro forma - invoice :

A preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. Typically, it gives a descripttion of the purchased items, notes the cost, as well as other important information like shipping weight and transport charges. Pro forma invoices are often used for customs purposes on imports.

A pro forma invoice differs from a simple price quotation in that it is usually considered a binding agreement, despite the fact that, like a price quote, the terms of sale are subject to change. Pro forma invoices are used by a wide variety of businesses in virtually all industries.

Proforma Invoice is a commercial term for documentation of goods consigned to an Agent by the principals. For instance, a cycle manufacturer, while sending cycles for sale to his agent will issue this proforma invoice. This is a not a sale and no tax would be involved. The Agent only stocks the goods and sell them to the customers at the price indicated by the principal and gets commission on the sale.  As the mercantile grew, the principal to principal system (principal invoices the goods to the distribution/re-distributor under a proper invoice (VAT Invoice) by sale has replaced the proforma invoice system, widely.

vasudevan