Purchase order format: what a PO must show, and a free template

What is a purchase order?

A purchase order is the buyer’s written order to a supplier: what to send, how many, at what price, where, by when and on what payment terms. It is the buyer’s document — the supplier answers it with a delivery challan or tax invoice when the goods go out. A PO is an offer to buy; once the supplier accepts it, it is the agreed order both sides work from, under the ordinary rules of contract in the Indian Contract Act, 1872.

What a purchase order format should include

There is no format prescribed by law, but a PO that leaves out any of these usually causes a dispute or a mismatched bill:

• • The title "Purchase Order", a unique PO number and the PO date.
• • Your name, billing address, state and GSTIN.
• • The supplier’s name, address, state and GSTIN.
• • The delivery address, if different, and the expected delivery date.
• • The supplier’s quotation number and date, if the PO accepts a quotation.
• • For each item: description, HSN or SAC, quantity, unit, rate and taxable value.
• • GST rate and amount (CGST + SGST for a same-state supplier, IGST for another state), and the total in figures and in words.
• • Payment terms, freight and packing, partial-delivery and rejection terms.
• • An authorised signature, and space for the supplier to accept.

Does a purchase order need GST?

A PO is not a GST document. GST is charged by the supplier on their tax invoice, and you claim input tax credit only against that tax invoice (Section 16 of the CGST Act), never against the PO. A PO also does not go into GSTR-1, which is filed by the supplier for their sales.

Showing the GST rate and amount on the PO is still worth doing. It tells the supplier which rate you expect, it gives you the full amount to budget, and when the invoice arrives at a different rate you catch it before you pay — not after your CA finds the mismatch in GSTR-2B.

Purchase order vs quotation vs invoice

The three documents follow each other. A quotation comes from the supplier and says "this is what we will charge". The purchase order comes from the buyer and says "we accept — send this". The tax invoice comes from the supplier after the supply and says "this is what you owe, with GST". A PO for services is often called a work order; the fields are the same, with SAC in place of HSN.

When the goods arrive, check the supplier’s invoice against both the PO and what you actually received (the goods receipt) before you pay. This is called three-way matching, and it is how you avoid paying for short supply or a rate you never agreed.

Payment terms when your supplier is a micro or small enterprise

If the supplier is registered as a micro or small enterprise under the MSMED Act, Section 15 of that Act requires you to pay within the agreed period, and the agreed period cannot be more than 45 days from acceptance of the goods. With no written agreement, the limit is 15 days. Late payment carries compound interest at three times the RBI bank rate (Section 16).

There is a tax cost too. Under Section 43B(h) of the Income-tax Act, applicable from FY 2023-24, an amount owed to a micro or small supplier that stays unpaid beyond that limit is deductible only in the year you actually pay it. Writing "30 days" or "45 days" on the PO, and paying on time, keeps both problems away.

Who a spreadsheet PO suits, and who needs software

If you place a few POs a month with a handful of regular suppliers, a spreadsheet PO and the register in the template are enough. If you raise POs every day, receive goods in part deliveries, or keep finding bills that do not match what was ordered, purchase software that links each PO to its bill saves the matching by hand.

If your purchasing needs multi-level approvals, budgets per department and reverse auctions, you need a procurement suite such as SAP Ariba or Coupa, not a PO template or small-business billing software.