An estimate is an approximate price that may change once the actual work is known. A quotation is a fixed price offer, valid for a stated period, that becomes binding once the customer accepts it. An invoice is issued after or at the time of supply, demanding payment for what was actually supplied. Estimates and quotations carry no GST liability; a tax invoice does.
Before you get paid, there is usually a conversation about price. In India that conversation produces a quotation, an estimate or both, and only later an invoice. Using the right document at each stage protects your margin and avoids awkward arguments when the bill arrives.
This guide explains how quotations, estimates and invoices differ, when to use each, what GST says (and does not say) about them, and how to move cleanly from quote to invoice.
What is an estimate?
An estimate is an approximate cost given before work starts, when the full scope is not yet known. It tells the customer "this is roughly what it will cost", with the understanding that the final figure may change.
Typical examples:
- A garage estimating a car repair before opening the engine
- A contractor estimating renovation work before measuring every wall
- An IT agency estimating hours for a feature that is not fully specified
A good estimate states its assumptions ("based on 40 hours of development") and says plainly that it is not a fixed price.
What is a quotation?
A quotation (or quote) is a fixed price offer for a defined quantity and scope, valid for a stated period. If the customer accepts within that period, you are expected to supply at that price.
Typical examples:
- A steel trader quoting a rate per tonne for 20 tonnes, valid for 7 days
- A printer quoting for 5,000 brochures of a fixed specification
- A software vendor quoting annual licences for 25 users
Because it can become binding on acceptance, a quotation should be precise about scope, price, taxes, delivery, payment terms and validity.
What is an invoice?
An invoice is issued when the supply happens or has happened. It demands payment for the actual goods or services delivered. For a GST-registered supplier making a taxable supply, it must be a tax invoice with the particulars in Rule 46 of the CGST Rules, issued at the time GST law prescribes: for goods, at or before removal or delivery; for services, within thirty days of supply under Rule 47.
For detail, see what is an invoice.
Quotation vs estimate vs invoice: side-by-side
| Point | Estimate | Quotation | Invoice |
|---|---|---|---|
| Stage | Before work, scope unclear | Before work, scope defined | At or after supply |
| Price | Approximate | Fixed for validity period | Actual amount due |
| Binding | Usually not on price | Binding once accepted | Creates a payment obligation |
| Validity | Often open | Stated period (e.g. 15 days) | Not applicable |
| GST liability | None | None | Yes, for a tax invoice |
| Mandatory GST format | No | No | Yes (Rule 46) |
| Reported in GST returns | No | No | Yes, in GSTR-1 |
| Numbering | Own series recommended | Own series recommended | Mandatory consecutive series |
| Buyer's next step | Approve or request quote | Issue purchase order | Pay |
Where does each fit in the sales cycle?
- Enquiry — the customer asks for a price.
- Estimate — if scope is uncertain, give an approximate figure.
- Quotation — once scope is fixed, send a firm offer with validity.
- Purchase order — the customer accepts by issuing a PO. See sales order vs purchase order.
- Proforma invoice (optional) — if an advance or approval is needed before supply. See proforma invoice vs tax invoice.
- Delivery and tax invoice — supply and bill.
- Receipt — confirm payment. See invoice vs bill vs receipt.
Not every sale needs every step. A retail counter sale goes straight to invoice. A fabrication project may go through all seven.
Worked example: from estimate to invoice
A Coimbatore fabrication unit is asked by a registered factory in the same state (Tamil Nadu) to build steel racks.
Estimate (1 October). Without exact drawings, the unit estimates "approximately ₹3,50,000 plus GST, based on about 2.5 tonnes of fabricated steel at ₹1,40,000 per tonne. Final price depends on approved drawings."
Quotation (8 October). After drawings are approved, the actual requirement is 2.8 tonnes. The unit quotes:
| Item | Qty | Rate (₹) | Amount (₹) |
|---|---|---|---|
| Fabricated steel racks | 2.8 t | 1,40,000 | 3,92,000.00 |
| Powder coating | 2.8 t | 9,000 | 25,200.00 |
| Taxable value | 4,17,200.00 | ||
| GST @ 18% (assumed) | 75,096.00 | ||
| Total | 4,92,296.00 |
Validity: 15 days. Payment: 30% advance, balance within 15 days of delivery.
Purchase order (12 October). The factory issues a PO matching the quote.
Delivery and tax invoice (30 October). The actual weight delivered is 2.75 tonnes. The invoice is raised on actuals:
| Item | Qty | Rate (₹) | Amount (₹) |
|---|---|---|---|
| Fabricated steel racks | 2.75 t | 1,40,000 | 3,85,000.00 |
| Powder coating | 2.75 t | 9,000 | 24,750.00 |
| Taxable value | 4,09,750.00 | ||
| CGST @ 9% | 36,877.50 | ||
| SGST @ 9% | 36,877.50 | ||
| Total | 4,83,505.00 |
The invoice is lower than the quotation because the delivered quantity was lower, and it references the quote and PO numbers so the factory's accounts team can match them. The 30% advance, if received before supply, would have been covered by a receipt voucher and adjusted against this invoice; see advance payment under GST.
What should a good quotation include?
- Your business name, address, GSTIN and contact
- Quotation number and date
- Customer name and address
- Item description, specifications, HSN or SAC, quantity, unit rate
- GST rate and amount, or a clear "prices exclusive of GST" note
- Delivery timeline and location
- Payment terms (see invoice payment terms)
- Validity period
- Exclusions and assumptions
- Signature or authorisation
How long should a quotation stay valid?
Validity protects you when costs move. Pick a period that matches how quickly your input prices change:
| Business | Typical validity | Reason |
|---|---|---|
| Metal, plastics or commodity traders | 3 to 7 days | Raw material prices change weekly |
| Manufacturers of standard products | 15 to 30 days | Moderate price stability |
| Service firms and agencies | 30 days | Rates change less often |
| Large projects | 30 to 90 days, with escalation clause | Long decision cycles |
If a customer accepts after the validity period, send a revised quotation rather than honouring a stale price by default.
How should you revise a quotation?
- Do not overwrite the original. Issue a revision with a suffix, such as
QT/26-27/0045-R1. - State what changed: quantity, specification, rate or tax.
- Reset the validity period.
- Ask the customer to reference the latest revision in their purchase order.
When is an estimate better than a quotation?
Use an estimate when you genuinely cannot price the job until work begins: repairs, renovation, investigative work or software features without full specifications. Give a range ("₹40,000 to ₹55,000") and list the assumptions. Once the scope is clear, follow up with a firm quotation. Customers generally accept this two-step approach when it is explained upfront.
What should a good quotation contain?
A quotation that is easy to accept is also easy to convert into an invoice later. Include:
- Your details and the buyer's, with GSTINs where available, so the invoice can reuse them.
- A quote number and date, in a series separate from your invoices.
- Item descriptions with HSN or SAC codes, quantity, unit and rate.
- GST shown separately, with the rate you expect to charge. State that tax will be charged at the rate in force on the date of supply.
- Validity period, such as "valid for 15 days from the date above".
- Delivery period and place, which also helps settle the place of supply.
- Payment terms, for example "30% advance, balance within 15 days of delivery".
- Exclusions: freight, installation, packing or anything else not included.
Worked example: a revised quote
A Ludhiana fastener maker quotes 10,000 bolts at ₹6.50 each, ₹65,000 plus GST, valid 7 days. The buyer replies on day 10 asking to proceed. Because the quote has expired and wire-rod prices have moved, the maker issues revised quotation Q/26-27/0142-R1 at ₹6.80 each: ₹68,000, plus GST at 18% (assumed) of ₹12,240, totalling ₹80,240. The buyer's PO quotes the revised number, and the tax invoice later refers to both.
Keeping the original and revised quotes, rather than overwriting one, gives you a clean record if the price is ever questioned.
Common mistakes
- Calling an estimate a quotation, then being held to an approximate price.
- No validity period, so a customer accepts a six-month-old quote after raw material prices have risen.
- Leaving GST off the quote, then surprising the buyer with 18% on the invoice.
- Using the invoice number series for quotations, which breaks the consecutive tax invoice series.
- Invoicing against the quotation instead of actual supply when quantities changed.
- Not referencing the quote and PO on the invoice, slowing the buyer's approval.
- Outdated tax rates in saved quote templates. GST was restructured from 22 September 2025; check your rates.
How software connects quotes and invoices
The cleanest workflow is converting a quotation directly into an invoice, so details carry over and only the actual quantities change. Billing Software by Betterwork, for example, generates GST invoices with HSN/SAC codes and lets you share them on WhatsApp with a payment link, so the step from accepted quote to invoice to payment is quick. You can also start from a ready quotation or invoice format on the templates page.
Quick decision guide: which document should you send?
| Situation | Send |
|---|---|
| Customer asks "roughly how much?" and scope is unclear | Estimate with assumptions and a range |
| Scope, quantity and specification are fixed | Quotation with validity and terms |
| Customer accepted and must pay an advance or get internal approval first | Proforma invoice |
| Goods are dispatched or the service is supplied | Tax invoice (or bill of supply if no GST applies) |
| Supplied value later turns out lower | Credit note against the invoice |
| Supplied value later turns out higher | Debit note or supplementary invoice |
Following this sequence keeps your tax invoice series clean, because only actual supplies ever reach it. Quotations and estimates can be revised freely; tax invoices should not be.
Key takeaways
- An estimate is approximate; a quotation is a firm offer; an invoice demands payment for actual supply.
- Quotations become binding on acceptance, so include scope, GST, validity and terms.
- Neither estimates nor quotations create GST liability; tax invoices do.
- Keep separate number series for quotations and invoices.
- Invoice the actual supply and reference the quote and PO.
This guide is general information, not tax advice. Rules last checked on 20 October 2026; confirm with your tax professional for your situation.