Goods and Services Tax (GST) is a transaction-based indirect tax where liability is determined based on the time of supply. Normally, Sections 12 (time of supply of goods) and 13 (time of supply of services) govern this aspect.

However, where there is a change in the rate of GST, determining which rate applies to a given transaction (old or new) can become confusing. A single transaction may involve different dates for supply, invoice, and payment, and each may fall before or after the change in rate.

To avoid ambiguity, Section 14 of the CGST Act, 2017 provides a special mechanism to determine the time of supply specifically in cases of change in GST rates. It overrides Sections 12 & 13, ensuring certainty and uniformity in tax compliance.

Importance of Section 14

1. Frequent GST rate changes – The GST Council revises rates from time to time.
2. Transactions straddle multiple dates – Supply, invoice, and payment may not occur on the same date.
3. Clarity for businesses – Ensures correct tax rate application, avoiding disputes and penalties.
4. Smooth transition – Provides a legal framework for shifting from old rate to new rate.

👉Golden Rule (Two out of Three Principle):

• If two out of three events (Supply, Invoice, Payment) occur before the rate change → Old rate applies.
• If two out of three events occur after the rate change → New rate applies.

Statutory Provision of Section 14

Section 14 of CGST Act, 2017 – Change in rate of tax in respect of supply of goods or services

(A) Where Supply is Before the Change in Rate:

1. Invoice & Payment after change → TOS = earlier of Invoice/Payment → New Rate applies.
2. Invoice before change, Payment after change → TOS = Invoice date → Old Rate applies.
3. Payment before change, Invoice after change → TOS = Payment date → Old Rate applies.

(B) Where Supply is After the Change in Rate:

1. Invoice before change, Payment after change → TOS = Payment date → New Rate applies.
2. Invoice & Payment before change → TOS = earlier of Invoice/Payment → Old Rate applies.
3. Payment before change, Invoice after change → TOS = Invoice date → New Rate applies.

Special Rule for “Date of Payment”

• Normally, date of payment is earlier of:
  • Date of entry in supplier’s books, or
  • Date of credit in supplier’s bank.
• Exception: If bank credit happens after 4 working days from the date of change in rate → bank credit date will be considered as date of payment.

Illustrations (Practical Scenarios)

Example 1: Supply before rate change (12% → 18% w.e.f. 01.10.2025)

• Supply: 28.09.2025
• Invoice: 05.10.2025
• Payment: 07.10.2025

👉 Both Invoice & Payment after change → TOS = earlier of Invoice/Payment = 05.10.2025 → 18% applies.

Example 2: Supply after rate change

• Supply: 02.10.2025
• Invoice: 29.09.2025
• Payment: 03.10.2025

👉 Supply after, Invoice before, Payment after → TOS = Payment date = 03.10.2025 → 18% applies.

Example 3: Supply before rate change

• Supply: 28.09.2025
• Invoice: 29.09.2025
• Payment: 05.10.2025

👉 Supply before, Invoice before, Payment after → TOS = Invoice date = 29.09.2025 → 12% applies.

Part A – Supply made Before Change

Part B – Supply made After Change

Conclusion

Section 14 of the CGST Act, 2017 acts as a bridging provision between old and new GST rates. It provides a special mechanism to determine the time of supply when there is a change in rate of tax.

The Golden Principle is straightforward:

• Two events before change → Old rate applies
• Two events after change → New rate applies

This ensures uniformity, prevents disputes, and helps businesses remain compliant during transitional rate changes. Proper understanding and application of Section 14 is essential for tax professionals, accountants, and businesses to avoid penalties and litigation.