Business Software
How an estimate differs from a quotation, how both differ from a proforma invoice and a GST tax invoice, and which document to send at each stage of a sale.
Checked against current rules for Estimate and quotation as commercial documents with no prescribed GST format; tax invoice for a taxable supply under Section 31 of the CGST Act and Rule 46 of the CGST Rules; input tax credit conditioned on a tax invoice or debit note under Section 16 of the CGST Act on 29 September 2026. Source: CBIC — Sections 16 and 31, CGST Act, 2017; Rule 46, CGST Rules, 2017 (as amended).
An estimate says roughly what a job is expected to cost. A quotation says what you will charge for a defined job, on stated terms, if the customer accepts within a stated period. Both are sent before any supply is made, both can carry GST details, and neither is a tax invoice. The difference lies in how certain the price and the scope are.
This article explains how these documents are generally used in business. Neither GST law nor this article prescribes a format for an estimate or a quotation, and whether a particular document binds either party depends on its wording and the circumstances. It is not legal or tax advice for your specific deal.
An estimate is a preliminary price given when the final scope, quantity or effort is not yet known. Contractors, agencies, repair shops and consultants use estimates to give a customer a realistic budget before the requirements are settled. You can prepare one with the free estimate generator.
A quotation is a commercial offer to supply defined goods or services at stated prices. It normally lists the items and quantities, the price and tax, the payment and delivery terms and the date until which the offer holds. The full layout is covered in the quotation format and sample, and you can build one with the free quotation generator.
Free Estimate Generator
Create a professional estimate online for free — communicate expected pricing to a customer before work begins, with optional discount and GST or custom tax, then preview, print or download it as a PDF.
What is the main difference between an estimate and a quotation?
An estimate is an approximate price given while the scope or quantity is still uncertain, and it can change. A quotation is a proposed price for a defined scope, offered on stated terms and usually for a stated period. The words are used loosely in everyday business, so label the document clearly and say what the price depends on.
Is an estimate or a quotation legally binding?
Not automatically. A quotation may amount to an offer that the customer can accept, and an estimate is normally understood as an approximation, but the outcome depends on the wording and the circumstances. State the validity period, what the price covers and what could change it, and take legal advice for high-value or unusual deals.
Can an estimate turn into a quotation?
Yes, and it often does. Once the scope is fixed, many businesses replace the estimate with a quotation that carries a firm price and a validity date. Mention the earlier estimate number so the customer can see what changed.
Do I show GST on an estimate or a quotation?
Neither document creates a GST liability, because tax is charged on the tax invoice issued for the supply. Many GST-registered sellers still show the expected GST so the customer sees the full amount. If you do, say clearly whether prices are inclusive or exclusive of GST.
Can my customer claim input tax credit on an estimate or a quotation?
No. Input tax credit depends on a valid tax invoice or debit note issued for the supply. An estimate, a quotation or a proforma invoice does not serve that purpose, so issue a GST tax invoice when the supply is made.
Which one should I send first?
Send an estimate when the customer needs a rough figure early and the requirements are not final. Send a quotation when you can define the scope and stand behind a price for a stated period.
GST & Tax
Quotation Format and Sample: How to Create a Professional Business Quotation
What a business quotation should include, a ready-to-follow format, a worked sample with GST, and the mistakes that cost businesses money — plus a free generator to build yours.
GST & Tax
Quotation vs Proforma Invoice vs Tax Invoice: What's the Difference?
What a quotation, an estimate, a proforma invoice and a GST tax invoice each do, when to issue which, and why only a tax invoice lets your customer claim input tax credit.
| Aspect | Estimate | Quotation |
|---|---|---|
| Purpose | Give a rough idea of cost | Make a priced offer for a defined job |
| Stage of the sale | Early, while requirements are forming | Once the scope can be defined |
| Pricing certainty | Approximate; may change | Proposed price for the stated scope |
| Scope | May be open or partly defined | Defined items, quantities and exclusions |
| Validity | Useful to state, often shorter or looser | Should state a clear valid-until date |
| Revisions | Expected as the scope firms up | Revised only by issuing a new or updated quotation |
| Customer acceptance | Usually leads to a discussion or a quotation | Acceptance can lead directly to an order |
| Commercial commitment | Normally treated as non-committal | May amount to an offer; depends on wording |
| Relationship to the invoice | Not an invoice; final bill may differ | Not an invoice; the invoice follows the supply |
The two words are used loosely, and some businesses use them interchangeably. What protects you is not the label but the content: say whether the price is approximate or firm, what it covers and until when it holds.
These four documents sit at different points in a sale and do different jobs. The detailed comparison is in quotation vs proforma invoice vs tax invoice; in short:
| Document | What it is | Records a sale? | Basis for input tax credit? |
|---|---|---|---|
| Estimate | Approximate expected cost | No | No |
| Quotation | Priced offer for a defined scope | No | No |
| Proforma invoice | Preliminary invoice-style document sent before supply | No | No |
| Tax invoice | Document for a taxable supply under Section 31 of the CGST Act, with Rule 46 particulars | Yes | Yes, when valid |
Only the tax invoice is a statutory GST document. A proforma can be useful before supply, for example to request an advance or support paperwork, but it does not replace the tax invoice — see what a GST invoice must contain for the mandatory particulars. You can create a proforma invoice and a GST tax invoice with the free tools.
You do not need every document for every sale. A small over-the-counter sale may need only an invoice, while a long project might move from an estimate to a quotation, then a purchase order from the customer, then invoices as work is delivered. The customer's purchase order confirms the order on their side; the purchase order guide explains that step, and a free purchase order generator covers it if you are the buyer.
A customer wants a business website but has not decided the number of pages, whether there will be an online store or what integrations they need. The agency sends an estimate of ₹80,000 to ₹1,20,000, stating that the range depends on the final page count and features. Once the customer settles on a 10-page site without a store, the agency sends a quotation for ₹95,000 plus GST, valid for 15 days.
A food business needs 5,000 printed boxes in a fixed size, board and print design. The scope is fully defined, so the supplier sends a quotation with the unit price, GST, delivery terms and a validity date. Since nothing is left to estimate, an estimate would only add uncertainty.
After accepting the packaging quotation, the buyer asks for a document to release an advance through their accounts team. The supplier issues a proforma invoice marked clearly as a proforma. It supports the payment request, but it is not the tax invoice.
The boxes are delivered. The supplier now issues a GST tax invoice for the supply, and that is the document the buyer relies on for input tax credit, provided the other conditions of the law are met. The earlier estimate, quotation and proforma stay on file as the commercial record of how the price was agreed.
If you can define the job and stand behind a price, send a quotation; if you cannot yet, send an estimate and say what would change it. When the tax details matter, check the GST rate for your goods or services first — how to calculate GST shows the arithmetic. Then create a free estimate or use the free quotation generator, and download the result as a PDF in a few minutes.
Free Proforma Invoice Generator
Create a professional proforma invoice online for free — a preliminary commercial document with optional GST estimate, then preview, print or download it as a PDF.