Yearly Subscription: Meaning, Billing & GST Timing

What Is a Yearly Subscription?

Taking a year’s money in one payment changes more than the date it arrives.

A yearly subscription is an arrangement where a customer pays for twelve months of a service in one go, usually at a discount against the monthly price. The money lands early, which is the appeal. In India the tax on it lands early too, which is the part that catches people out.

A yearly plan is a pricing decision before it is a billing one. Bill monthly and you are into recurring invoice territory; bill yearly and one invoice covers it.

What to Settle Before You Offer a Year

Four things need deciding before the first annual invoice goes out:

• The discount: price it against the cash you gain, not against a competitor
• The tax: a whole year’s GST lands in one return, so budget for it in month one
• The refund terms: write them down before you sell, not when someone cancels
• The renewal date: diary it, because cash flow plans around it

Only the first of those is visible to the customer. The rest are yours to carry.

Yearly vs Monthly Subscription

Aspect	Yearly	Monthly
Price	Discounted	Full rate
Cash in	All in month one	Even across the year
GST due	All in one return	Spread over twelve
Refund risk	Up to eleven months	One month
Churn	Once a year	Any month

Neither is better. A business short of working capital offers the year. A business still unsure of its own service offers the month.

Pricing that discount means setting it against what a year is genuinely worth to you: cash eleven months early, less the GST handed over just as early, less whatever you refund if the customer walks in month four.

Yearly Subscription Example

Take a pest control firm in Warangal, Telangana. It charges a housing society Rs.2,200 a month, or Rs.24,000 for the year paid upfront.

Line	Billed monthly	Billed yearly
Fee	Rs.2,200 a month	Rs.24,000 once
Year total	Rs.26,400	Rs.24,000
GST at 18%	Rs.396 a month	Rs.4,320 once
Cash in	Rs.2,596 a month	Rs.28,320 in month one

Note: this is an invented example for illustration only. The figures show the timing, not a real contract.

The yearly customer saves Rs.2,400, near enough a month free. In exchange the firm hands over Rs.4,320 of output tax in its first return, eleven months before it has finished earning the money. Cancel in month four and Rs.16,000 of that is service still owed.

When the GST Falls Due on a Year Taken Upfront

The timing is the part people get wrong, and it is worth being exact.

For a service, section 13(2) of the CGST Act sets the time of supply as the earlier of the invoice date, where the invoice goes out within the prescribed period, or the date the payment is received. Take the year’s money in April and the GST is April’s liability, whatever the service calendar says. The wording sits in section 13 of the Act.

Section 13 governs services. A subscription that ships goods runs on section 12 instead, so check which one you are actually supplying.

If the money arrives before you raise the invoice, a receipt voucher is required for the advance. Across the businesses we work with, that voucher is routinely the one that gets skipped. A GST calculator will size the liability before you quote the discount, and there is a wider argument for annual pricing in this piece on fixed annual costs.

Know the GST Before the Money Lands

Whatever discount you settle on, the tax on it still has to be right on the invoice.

Petpooja Invoice applies accurate and automatic GST calculations on every invoice generated, with a detailed breakdown of tax components, and gives real-time visibility into your GST liability across tax payable, input tax credit and cash ledger balance.

On a year billed at once, that liability figure is the one worth looking at before you spend the cash. This GST invoice template covers the fields an annual invoice still has to carry.

Work out the tax on a full year before you offer the discount, not after.

Frequently Asked Questions