The Rhythm Of Time In GST - When Continuous Supply Meets Changing Rates

1. The Curious Case Begins - When a Calendar Became a Tax Master

In taxation, often the most eye-opening lessons come not from the intricate details of the law, but from the simple circumstances we face. While numbers may stay the same, contracts might not change, and everyone's intentions could be clear - just a tiny shift in the calendar can quietly change the rate, the liability, and the outcome. It's a reminder that sometimes, small changes can make a big difference, and staying attentive to those moments can really make a difference.

Here's an interesting case involving Kirti Ltd., a corporate travel management firm, and Shreyans Hotels Ltd., a well-known hotel group catering to business clients across India. In July 2025, Kirti Ltd. signed a long-term deal with Shreyans Hotels to provide comfortable accommodation for its executives and guests at an agreed rate of ₹7,000 per day for each room. This arrangement covered the period from July 2025 to November 2025, demonstrating a typical scenario of continuous supply of services as described in Section 2(33) of the CGST Act, 2017.

However, in August 2025, a disagreement arose over some incidental charges. As a result, Shreyans Hotels didn't issue any tax invoices from August 2025 onward. Payments were also delayed, disputed, or held back while the issue was being sorted out. This situation remained unresolved until November 2025, when both sides finally reached an agreement, and Shreyans Hotels agreed to issue all pending invoices.

However, by then, there was a new development-not in their understanding, but in the law itself. According to Notification No. 15/2025 - Central Tax (Rate) dated 20 September 2025, the Government reduced the GST rate on hotel stays and similar ongoing services from 12 per cent to 5 per cent, effective 22 September 2025.This raised an important question that goes beyond hotels-one that touches on all ongoing services like leasing, maintenance, consultancy, and rentals:

"When the tax rate changes midway, how does the supplier figure out which rate to use-the old one or the new one?"

It's a straightforward question at first glance, but it really gets to the heart of GST's core principles-because in this law, time itself determines the applicable tax.

2. The Legal Framework - When Value Replaced Declared Tariff

The hotel accommodation example helps to explain the overall GST framework, which applies to any ongoing supply of services. According to Services Rate Notification No. 11/2017 - Central Tax (Rate) dated 28 June 2017, and its subsequent updates, the GST rate is now based on the value of the supply itself, rather than the previously used declared tariff.

This transition, introduced by Notification No. 20/2019 - CT (R) dated 30 September 2019, made the rate determination clearer by aligning it with Section 15 of the CGST Act, 2017. The value of supply is based on the actual transaction value, which is the price paid or payable for the supply, especially when the supplier and recipient are not related and the price is the only consideration involved.

This change was more than procedural; it represented a philosophical shift from perception to precision - from hypothetical rates to real value. For our illustration, this meant that the taxable value per day was ₹7,000, and the applicable rate was determined by law as follows:

While the illustration highlights hotel accommodation for clarity, please remember that the same principles perfectly apply to all types of long-term or recurring service contracts. Whether it's leasing equipment, yearly maintenance, supplying manpower, or consultancy retainerships, the core ideas remain consistent.

3. Statutory Provisions - The Silent Backbone of Compliance

Every rate change is based on a careful legal framework. The main rules that guide this process include Sections 7, 13, 14, 31(5), and 2(33) of the CGST Act, 2017, as well as Rule 35 and Section 50(1).

Section 7(1)(a) describes supply as any way of providing goods or services for payment, especially when done as part of a business. This includes all ongoing service contracts, making sure every aspect is covered. Further, in the case of continuous supply of services, Section 31(5) governs the timing of invoicing. It provides as under:

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services, -

(a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;

(b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;

(c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

This special provision under Section 31(5) takes precedence over the usual 30-day invoicing rule in Section 31(2). Section 31(5) recognises that continuous services are often provided through ongoing milestones or regular billing cycles, rather than a one-time transaction.Section 31(3)(d) provides that a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment;

The fulcrum remains Section 13(2), which helps us determine the time of supply of services. This is based on the earliest of three dates: the invoice date, the payment date, or the service-provision date. So, while Section 31(5) guides us on when to issue the invoice, it's Section 13(2) that tells us when the tax liability actually kicks in.

Whenever the tax rate changes during a continuous contract, Section 14 provides useful guidance. guide. It offers a clear, detailed matrix that connects the date of supply, date of payment, and date of invoice, making it straightforward to determine the correct rate with confidence.

In essence, Section 14 may be understood through what can be called the "Majority Rule" - that is, the rate of tax applicable to a particular supply of services shall depend on the completion of any two out of the following three events:

1. The date of supply of service,
2. The date of the invoice, and
3. The date of payment.

Where two of these three events occur before the rate change, the old rate applies; where two occur after, the new rate prevails. This conceptual "majority rule" makes Section 14 an elegant yet precise instrument of timing - ensuring certainty for taxpayers and clarity for administrators.

Similarly, Section 2(33) describes a continuous supply of services as a contract involving regular or recurring supplies that last beyond three months. This highlights how vital timing and consistency are for staying in compliance.

Together, these provisions create the steady backbone of GST - a system where law and time work seamlessly in harmony. They serve as a gentle reminder that GST isn't just a tax code, but a thoughtful measure of time - a framework that turns each passing date into an opportunity for accountability.

4. Analytical Discussion - When Law Meets Logic

Applying these provisions to the Kirti-Shreyans case (and, by extension, to any continuous supply of services), the analysis becomes not only logical but also quite instructive. The services were provided from July 2025 to November 2025, but from August 2025 onwards, invoices were deferred until November 2025 due to a dispute. Each month's service, however, is independently qualified as a supply under Section 2(33).

A conjoint reading of Section 31(5) and Section 13(2) reveals that the timing of supply for a continuous supply of services primarily depends on designated contractual milestones or payment schedules. Section 31(5) guides us on when to issue invoices-either by the due date, upon receiving payment, or after a related event is completed. Meanwhile, Section 13(2)(a) indicates that the supply time is set at whichever comes first: the invoice date or the payment date. If an invoice isn't issued within the timeframe set by Section 31(5), then Section 13(2)(b) adjusts the timing to the earlier of when the service is provided or when payment is received.

The rate change effective from September 22, 2025, introduces Section 14, which uses a straightforward "majority rule" to determine the rate. This means that the rate depends on two out of three key events: (i) providing the service, (ii) issuing the invoice, and (iii) receiving payment. If two of these events occur before the change, the current rate remains in effect. However, if two happen after the change, the new rate will apply. This approach helps make the process clear and easy to understand.

5. Treatment of On-Account Payments - The Role of Rule 35

If a supplier receives any consideration without issuing invoices or clearly charging GST, Rule 35 of the CGST Rules, 2017 offers guidance. It explains that when the total value of supply includes tax, the tax amount can be calculated by applying the tax rate to the total value (including tax) and dividing by 1 + the tax rate. This helps ensure the correct amount of GST is determined fairly and accurately.

Basically, whenever a payment comes in without GST being broken out separately, it's considered to include tax in the total amount. So, if Shreyans Hotels (or other similar service providers) received payments from August to November 2025, those amounts are assumed to include GST already. When they issue invoices later in November 2025, they'll need to perform a backward calculation of the tax under Rule 35.

For example, if Shreyans Hotelsreceived ₹7,00,000 in August 2025 when the applicable rate was 12 per cent, the tax amount would be approximately ₹75,000, calculated as ₹7,00,000 × {12}{112}. The taxable value in this case would be ₹6,25,000.

This helps make things fair and transparent: once the consideration is received, the supplier can't add extra tax later on. Rule 35 serves as a helpful safeguard that connects how we determine value to the timing of supply, ensuring everything stays transparent, even in the face of disagreements.

6. When the Supplier Neither Issues an Invoice nor Receives Any Payment During the Disputed Period

At first glance, it may appear that all services rendered before 22 September 2025 should be taxed at the old 12% rate. However, the GST law goes beyond mere chronology of performance - it evaluates the sequence of events in documentation and payment. The timing of these two events can completely transform the tax outcome.

In the present case, Kirti Ltd. and Shreyans Hotels Ltd. had been operating smoothly during July 2025, with invoices issued and payments received in the normal course. Hence, for July 2025,Section 13(2) applies, and the old rate of 12% remains valid.However, from August 2025 onwards, a dispute arose between the parties. No invoices were issued, and payments were withheld until November 2025, when the dispute was finally settled. By that time, the rate change (12% → 5%) had already come into effect from 22 September 2025.

In such a case, Section 14(2)(b) of the CGST Act, 2017 governs the determination of the applicable rate. This section provides that where the service was supplied before the rate change, but both the invoice and payment occur after the rate change, the time of supply shall be the earlier of the date of invoice or the date of payment - both of which, in this instance, fall in November 2025.

Accordingly, the new 5% rate applies to all services rendered from August to November 2025, even though the actual work was performed much earlier. This reinforces one of GST's core truths: in taxation, performance may begin the story, but timing writes the conclusion.

7. Month-Wise Position of Applicable Rate of GST and its ITC implications for Shreyans Hotels Ltd.

8. Practical Implications and Compliance Lessons - When Law Tests Discipline

This case is far more than a matter of technical interpretation. It is a living example of how discipline - or the lack of it - silently shapes outcomes under GST. For July 2025, everything between Kirti Ltd. and Shreyans Hotels Ltd. moved like clockwork. The invoice was issued in time, payments were received promptly, and the 12% rate applied effortlessly. But from August 2025 onward, a single unresolved dispute threw that rhythm off balance. Invoices stopped, payments paused, and by the time the matter was resolved in November 2025, the law had already changed its tune - reducing the rate to 5% and withdrawing ITC eligibility.

The moral is clear: GST does not wait for settlements, emotions, or convenience. The law respects timing - not intention. Section 13(2) quietly converts delay into liability, while Section 14(2)(b) rewards or penalises timing depending on which side of the rate change one falls. Even an honest business dispute cannot pause the legal clock. The invoice you delay, the payment you postpone, or the reconciliation you defer may not merely shift your cash flow - it may alter your tax rate, credit eligibility, and compliance cost.

For professionals and taxpayers alike, this case reinforces that compliance is a rhythm, not a reaction. One must learn to respect the cadence of law. Timely invoicing is not just good accounting practice - it is good tax strategy. Periodic reconciliation is not mere housekeeping - it is legal protection. GST, in its quiet precision, teaches us that every delay carries a cost: some measured in money, others in missed opportunities. The art of compliance lies not in memorising sections, but in syncing our actions with the rhythm of time itself.

9. The Moral of the Story - When Time Becomes the Real Taxmaster

The law does not punish; it simply records. Each date, each invoice, each payment entry becomes a timestamp of responsibility. Under GST, as in life, timing is destiny. If the invoice that should have been raised in August 2025 is issued only in November 2025, the law quietly changes its conclusion - the rate, the credit, even the consequence. The hands of the clock decide the fate of the transaction, not the words of the contract.

Every section of the GST Act whispers the same timeless truth. Section 13 reminds us that liabilities arise not by choice, but by chronology. Section 14 shows that rate changes are indifferent to intention. Rule 35 ensures fairness when payments come without clarity. Together, they form a symphony of accountability - precise, impartial, and patient. The law rewards those who stay in rhythm; it charges interest to those who fall out of tune.

At first glance, it may appear that the recipient of services, Kirti Ltd., benefited financially when the GST rate dropped from 12% to 5% in August 2025. But that impression is only partially true. In reality, the Recipient (Kirti Ltd.) - being a registered business recipient - remains eligible to avail input tax credit (ITC) of whatever GST is charged to it, whether at 12% or 5%, subject to satisfaction of Section 16 conditions. The fundamental limitation lies with the supplier, Shreyans Hotels Ltd. When it charges GST at the concessional rate of 5%, it is prohibited from availing any input tax credit on its inward supplies, as explicitly provided under Notification No. 15/2025-Central Tax (Rate). Thus, while the rate may appear lower, the compliance cost quietly shifts to the supplier's side.In the realm of GST, a reduced rate rarely tells the whole story. What seems like a concession on the face of it may, in truth, be a compromise in credit - a transfer of burden from the taxpayer to the tax collector. The lesson, therefore, is simple yet profound: in taxation, every relief comes wrapped in a condition, and every rate comes with a rider.

In life, the same melody keeps playing all around us. A delayed invoice could cost some money; a delayed reply might harm a relationship; a postponed decision could mean missing out on a dream. Discipline isn't about being rigid - it's about staying aligned. People who treasure time find peace even when things get busy; those who overlook it may face penalties, whether in law or in life. So, whether it's about taxes, trade, or simply time itself - the lesson is universal: respect the clock, and the law will respect you.

"Settle disputes slowly if you must, but raise your invoices timely - because GST never forgets the date… and neither does life."