GST Rate Change and the Time of Supply (Section 14)

1. The Conflict: 12% vs. 18% GST

The petitioner completed a project on June 8, 2022, during which the applicable GST rate was 12%. However, a rate increase to 18% took effect on July 18, 2022. The third respondent (contractor/supplier) raised the invoice only after this date and charged the higher rate.

Petitioner’s Stand: Since the work was finished before the rate change, they should only be liable for 12% GST. They sought reimbursement for the additional 6% they were forced to pay.
Respondents’ Stand: They argued the delay in invoicing and payment was actually caused by the petitioner’s own administrative delays. Legally, the tax rate is determined by the “Time of Supply” rules under Section 14.

2. Legal Analysis: Time of Supply under Section 14(a)(i)

Section 14 of the CGST Act overrides the general rules of Sections 12 and 13 when a tax rate changes.

I. The Rule for Pre-Change Supply

When services are supplied before the rate change, but the invoice and payment occur after the change, Section 14(a)(i) dictates:

The Time of Supply shall be the date of issuance of the invoice OR the date of receipt of payment, whichever is earlier.

II. Application to Facts

In this case:

Supply: Completed June 8 (Before change).
Invoice: Issued after July 18 (After change).
Payment: Received after July 18 (After change).

Result: Because both the invoice and payment happened after the rate hike, the Time of Supply is after the hike, and the 18% rate is legally applicable.

3. Writ Jurisdiction and Disputed Facts

The High Court declined to interfere under Article 226 (Writ Jurisdiction) for two reasons:

Attributable Delay: There was a “prima facie” indication that the petitioner caused the delay in the invoicing process. The court cannot reward a party for its own delays.
Factual Disputes: Determining who was truly responsible for the delay (petitioner or respondent) requires an examination of emails, logs, and contract terms.
- The Principle: High Courts generally do not adjudicate “disputed questions of fact” in a writ petition. Such matters must be resolved through Arbitration or Civil Courts.

Key Takeaways for Contract Management

Prompt Invoicing: If you are a contractor, ensure invoices are raised immediately upon completion (or “milestone” achievement) to lock in lower tax rates before a notified hike.
Contract Clauses: Include a “Change in Law” or “Tax Variation” clause that specifies who bears the burden of statutory rate increases.
Evidence of Completion: Maintain strict documentation (Completion Certificates, Handover Memos) to prove the date of supply, though remember that Section 14 also requires the invoice/payment to be timely.
Alternative Remedy: If you have a factual dispute over tax reimbursement in a contract, the first step should be the Dispute Resolution Mechanism defined in the contract, not the High Court.

HIGH COURT OF MADRAS

SPK and Co.

Additional Commissioner

Krishnan Ramasamy, J.

W.P. (MD) No. 35386 of 2025
W.M.P. (MD) Nos. 28075 & 28077 of 2025

DECEMBER 10, 2025

B.Vijay Karthikeyan for the Petitioner. R.Gowri Shankar, Senior Standing Counsel and R. Suresh Kumar, Additional Government Pleader for the Respondent.

ORDER

1. In this Writ Petition, the petitioner challenges the order of the third respondent dated 26.04.2024 whereby the petitioner’s request for remittance of the differential cost arising from the increase in GST from 12% to 18% was rejected and seeks a direction to the third respondent to reimburse/pay the differential GST amount by considering the petitioner’s representation dated 22.03.2024.

2. The learned counsel for the petitioner submitted that in the present case, initially the petitioner was liable to pay tax on the invoices raised by the third respondent for the projects executed by the petitioner at the rate of 12%. Subsequently, the rate of tax was increased from 12% to 18% with effect from 18.07.2022. Though the work was completed on 08.06.2022, the third respondent raised the invoice at a later point of time. [Despite this Court spending about ten minutes, the learned counsel was not in a position to furnish the particulars regarding the exact date of the invoice.] The fact remains that the invoice was raised only after 18.07.2022. [None of the counsel is in a position to give particulars with regard to the date of payment made by the third respondent to the petitioner.] But, the fact remains that the payments were made by the third respondent to the petitioner after 18.07.2022.

3. Under these circumstances, by referring to the provisions of Section 14(a)(i) of the Central Goods and Services Tax Act, 2017 [hereinafter referred to as ‘Act’], the learned counsel for the petitioner submitted that the applicable rate of GST would be the rate prevailing on the date of issuance of the invoice or the date of receipt of payment, whichever is earlier and such date shall be treated as the date of supply for the purpose of determination of GST. Therefore, he submitted that the petitioner made subsequent claims against the third respondent for the differential GST amount, which came to be rejected.

4. The learned counsel for the petitioner, by referring to the Circular dated 10.02.2023 bearing Reference No.RW/G-20017/26/2018-W&A issued by the Ministry of Road Transport and Highways (Planning Zone), Government of India, submitted that in cases where invoices were raised and payments were made subsequently and in terms of the provisions of Section 14(a)(i) of the Act, if there is an increase in the tax rate, the increased tax amount is required to be borne by the National Highways Authority. He further submitted that without considering the said Circular and statutory provisions, the third respondent rejected the petitioner’s request vide the impugned order.

5. The learned Additional Government Pleader appearing for the second and third respondents submitted that in the present case, the work was not completed on or before 03.07.2020 as stipulated under the original agreement and therefore, the time for completion was extended till 20.05.2022 due to the petitioner’s failure to complete the work within the stipulated period. The work completion certificate was issued on 08.06.2022.

6. He further submitted that if there is any default on the part of the third respondent in making payment after the invoice is raised, the third respondent would be liable. However, in the present case, the default is on the part of the petitioner, though the work completion certificate was issued on 08.06.2022 and the invoices were raised and payments were made only after the revision of GST from 12% to 18%. Therefore, the default cannot be attributed to the third respondent. He further submitted that due to the fault on the part of the petitioner, the higher rate of GST cannot be fastened upon the third respondent.

7. Heard the learned counsel for the petitioner, the learned Standing Counsel for the first respondent and the Additional Government Pleader for the second and third respondents.

8. A reading of Section 14(a)(i) of the Act makes it clear that for the purpose of determination of GST, the date of supply would be either the date of issuance of the invoice or the date of receipt of payment, whichever is earlier. In the present case, the work completion certificate was issued on 08.06.2022, whereas the revision of GST came into effect from 18.07.2022. For a period of more than 40 days thereafter, no invoice was raised.

9. From the submissions of the learned Additional Government Pleader appearing for the second and third respondents, it prima facie appears that the delay in raising the invoice prior to 18.07.2022 and in effecting payment subsequently is attributable to the petitioner and the same cannot be attributed to the third respondent. Therefore, the third respondent has rightly denied the claim for payment of the differential tax amount.

10. There is no dispute that this Court, by following the Circular dated 10.02.2023, can issue appropriate directions, as by virtue of the said Circular, if there is any increase in tax as on the date of payment or the date of issuance of invoice, the principal is liable to pay the differential tax. However, in the present case, as stated above, though the work completion certificate was issued on 08.06.2022, the invoice was raised after a lapse of 40 days, i.e. on 18.07.2022. It is evident that the default is on the part of the petitioner and the same cannot be attributed to the third respondent.

11. Even otherwise, these are disputed questions of fact, which cannot be adjudicated by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India. Further, this Court is in full agreement with the law laid down by this Court in the judgments cited by the learned counsel for the petitioner. However, the facts of the present case are entirely different. Therefore, this Court is not inclined to entertain the present Writ Petition.

12. Accordingly, this Writ Petition is dismissed with liberty to the petitioner to work out his remedy before the appropriate civil court or arbitral forum, wherein the learned Judge or the learned Arbitrator shall consider the petitioner’s case on its own merits and without being influenced by any of the observations made by this Court in this order. No costs. Consequently, the connected Miscellaneous Petitions are closed.F