Is a purchase order legally binding in India?

Generally yes once the vendor accepts it. Your PO is an offer to buy on stated terms, and the vendor's written confirmation, or starting to supply, accepts it. That makes it a contract under the Indian Contract Act. If you want to be able to cancel freely, say so in the PO terms. This is general information, not legal advice.

Can I claim input tax credit on a purchase order or a proforma invoice?

No. Input tax credit needs a GST tax invoice (or a debit note, or a bill of entry for imports) in your hands. A PO and a proforma invoice are not tax documents, so neither supports a credit claim.

Who sends first: the buyer or the seller?

Usually the seller, with a quotation. The buyer then sends a PO that matches the quote. If the buyer already knows the price, the buyer may send the PO first and the vendor confirms it. Either way, the tax invoice comes last, after the supply.

Do I need a PO for a small purchase?

There is no legal rule that says so. A PO is a good habit once an order has a delivery date, a price you want locked in, or more than one person approving spend. For a one-off cash purchase, the vendor's bill is enough.

What if the price or quantity changes after I send the PO?

Send a revised PO with the same number and a revision mark (for example PO-0042 Rev 1), and ask the vendor to confirm it in writing. Do not agree changes only on a call, because the invoice will follow whatever was written down.

Does the PO have to carry my GSTIN?

It should, for a business-to-business purchase. The vendor copies your GSTIN and legal name onto the tax invoice, and your input tax credit depends on that invoice having them right. Putting them on the PO means the vendor starts from the correct details.

How quickly must I pay a micro or small enterprise vendor?

Within the time in your written agreement, which cannot be more than 45 days, or within 15 days if there is no written agreement. Pay later and the expense is not deductible in that year; you get the deduction only when you actually pay. The clock runs from the day the goods or services are accepted.

Purchase Order vs Quotation vs Invoice: What Each Is For

Three documents move a purchase from "how much?" to "paid", and small businesses mix them up constantly. A quotation sent as if it were an invoice, a PO treated as a bill, a proforma invoice used to claim GST credit. Each one has a different sender, a different job and a different tax status.

This post sorts them out in order, shows what each must contain, and covers the one place where the PO matters for tax: payment terms for micro and small vendors.

The short answer

Document	Sent by	Sent when	Job	A GST document?
Quotation	Seller	Before the order	Offers a price and terms, with a validity date	No
Purchase order (PO)	Buyer	After the quote is accepted	Commits to buy: items, price, delivery	No
Proforma invoice	Seller	Before supply, if payment comes first	Previews the final bill	No
Tax invoice	Seller	At or after supply	Demands payment and carries the GST	Yes

Only the last row is a tax document. The three before it are commercial paperwork. They record what was agreed, but they do not create GST liability, and none of them lets the buyer claim input tax credit.

The order they come in

Quotation. The buyer asks for a price. The seller replies with items, rates, GST, delivery time and a "valid until" date.
Purchase order. The buyer accepts by issuing a PO that matches the quote, with its own PO number.
Supply. The seller delivers the goods or does the work.
Tax invoice. The seller bills against the PO, quoting the PO number.
Payment. The buyer pays against the invoice.

If the seller wants money before delivering, a proforma invoice goes in between steps 2 and 3. It looks like an invoice but is only a preview. The real tax invoice still has to follow.

Quotation: the seller's offer

A quotation says "here is what I will charge." It lists items, quantities, unit prices, the GST rate on each line and the total, plus delivery time, payment terms and how long the price holds. Our Quotation Generator puts a "Valid until" date on it for that reason.

A quotation does not need a GSTIN to be issued, and it creates no tax liability. It is an offer, not a bill. The buyer can ignore it, and after the validity date the seller can reprice.

Purchase order: the buyer's commitment

A PO is sent by the buyer, to the vendor, before anything ships. It says what you are ordering, at what price, and by when. The vendor can then plan the supply, and you hold a record you can point to if the invoice later shows something different.

Legally, the PO is usually your offer to buy on the stated terms. The vendor accepts by confirming it in writing or by starting the supply, and that makes a binding order. If you need room to cancel or change it, write that into the terms. This is general information, not legal advice.

What a PO should contain

PO number and date. Use a running series, for example PO-0042, so each order can be traced.
Your details. Legal name, address and GSTIN, and a separate ship-to address if goods go to a different site.
Vendor details. Legal name, address and GSTIN.
Items. Description, HSN or SAC code, quantity, unit and agreed price per unit. The HSN Code Finder helps with the code.
GST. The rate and the CGST/SGST or IGST split you expect, for your own reference. The vendor will charge the actual tax on the invoice.
Delivery. Required-by date, place of delivery and who pays freight.
Payment terms. Days from delivery or invoice, and mode. See the MSME point below.
A reference to the quotation it is based on.

Our Purchase Order Generator has fields for all of these and downloads a PDF or Excel file, free, with nothing leaving your browser.

Put your GSTIN and legal name on it

For a business purchase, the vendor copies your GSTIN and name onto the tax invoice. Your input tax credit depends on that invoice carrying them correctly. A PO with the right details at the start means the vendor does not guess, and you do not end up asking for a corrected invoice a month later.

Proforma invoice: a preview, not a bill

A proforma invoice is a seller's pre-bill. It is issued when payment is wanted in advance, for a customs or bank requirement, or to let the buyer arrange funds. It shows what the tax invoice will say.

It is not a tax invoice. It cannot be used for GST returns, and the buyer cannot claim input tax credit on it. If you pay against a proforma, you still need the actual tax invoice when the supply happens.

Tax invoice: the only one that counts for GST

The tax invoice is the seller's demand for payment and the document that carries the GST. It must have the details listed in Rule 46 of the CGST Rules, 2017, including a unique serial number, both GSTINs, HSN or SAC code, taxable value and the tax split. For goods it is issued at or before delivery. For services it is generally issued within 30 days of the supply.

For the buyer, it is the document that matters most. Input tax credit needs a tax invoice (or a debit note, or a bill of entry for imports) in your hands. Check it against your PO: the items, prices and quantities should match what you ordered, and the invoice should quote your PO number.

Our GST Invoice Generator makes a tax invoice with all of the Rule 46 fields.

Where the PO matters for tax: paying MSME vendors on time

A PO is not a tax document, but its payment terms can be. If your vendor is a registered micro or small enterprise, the law limits how long you may take to pay:

If there is a written agreement, pay within the agreed time, which can be at most 45 days.
With no written agreement, pay within 15 days.
The clock starts on the day the goods or services are accepted.

If you pay later than that, the expense is not deductible in the year it was booked. It is allowed only in the year you actually pay. This is the rule in Section 43B(h) of the old Income Tax Act, and it carries over into the Income-tax Act, 2025.

This is where the PO helps. Writing "payment within 30 days of delivery" on the PO, and getting the vendor's written confirmation, is the written agreement. Without one, the 15-day limit applies.

Four mistakes to avoid

Treating the PO as the invoice. The vendor still has to issue a tax invoice. Without it you have no input tax credit, and nothing to file against.
Paying a proforma and stopping there. Ask for the tax invoice when the supply is made.
Agreeing changes on a call. If price, quantity or date change, issue a revised PO and get a written confirmation. The invoice will follow whatever is on paper.
Leaving payment terms blank. With a micro or small vendor, a missing agreement can mean the 15-day limit, not the 45 you were assuming.

TDS is a different matter and does not start with the PO. It applies when you pay or credit the vendor under the invoice, where the supply is of a kind that carries it. For contractor and labour work, see TDS on contractor payments under 194C.

A simple checklist

Get a quotation with a validity date.
Issue a PO that matches it, with your GSTIN, the HSN/SAC codes, delivery date and payment terms.
Have the vendor confirm it in writing.
When the goods arrive, check them against the PO.
Ask for a tax invoice that quotes the PO number, and check the GSTIN, rate and amounts.
Pay within the agreed time, keeping to 45 days for micro and small vendors.

Sources

This post is correct as of 1 October 2026. It explains the usual position and is not legal or tax advice. For a specific contract, check with your CA or lawyer.