A customer on your Basic plan wants to move to Pro halfway through the month. Another wants to drop from 20 users to 12 on day 10. A third wants to downgrade but has already paid for the full year.
What do you charge? What do you refund? And how do you show it on a GST invoice?
Plan changes are where subscription billing gets messy. Handle them badly and you either lose revenue or frustrate customers with charges they don't understand. Handle them well and upgrades become effortless, which is exactly what you want.
This guide explains what proration is, how to calculate it and how to handle upgrades and downgrades fairly, clearly and in line with GST rules.
Proration means charging a customer only for the portion of a billing period they actually used on each plan. When a customer changes plans mid-cycle, you split the period into two parts: the days on the old plan and the days on the new plan.
Here's a simple example. A customer pays ₹3,000 a month for a 30-day cycle and upgrades to a ₹6,000 plan on day 16. They've used 15 days of the old plan and have 15 days left. Instead of charging a full ₹6,000, you charge only the difference for the remaining 15 days: ₹1,500.
Without proration, you're left with two bad options: make customers wait until the next cycle to upgrade or charge them for time they didn't use. Proration removes both problems.
The most common method is daily proration. You work out what each plan costs per day and multiply by the days remaining in the cycle.
Prorated amount = (New plan price - Old plan price) × (Days remaining / Days in billing cycle)
A positive result is an extra charge (an upgrade). A negative result is a credit (a downgrade). Here are three worked examples, all on a 30-day cycle, with amounts before GST.
| Scenario | Change | Days remaining | Calculation | Result |
|---|---|---|---|---|
| Upgrade | ₹2,000 → ₹5,000 plan | 20 | (₹5,000 − ₹2,000) × 20/30 | Charge ₹2,000.00 |
| Downgrade | ₹5,000 → ₹2,000 plan | 10 | (₹2,000 − ₹5,000) × 10/30 | Credit ₹1,000.00 |
| Seat reduction | 20 → 12 users at ₹500/user | 20 | (8 users × ₹500) × 20/30 | Credit ₹2,666.67 |
In the upgrade example, the customer would pay ₹2,000 plus 18% GST (₹360), for a total of ₹2,360.
A few decisions affect the result, so settle them upfront:
Actual days or a fixed 30: Using the real number of days in each month (28 to 31) is more precise. A fixed 30-day month is simpler to explain.
Daily or hourly: Daily proration is standard for most B2B plans. Hourly is mainly used for cloud and infrastructure products.
Rounding: Round to two decimal places and apply the same rule every time, so totals always match your books.
Upgrades are good news, so the goal is to make them instant and painless. There are three common approaches.
For most businesses, option 1 or 2 works best. Customers who upgrade usually need the extra features, seats or limits right away.
A few extra points to decide:
Billing period changes: If a customer moves from monthly to annual, you'll usually credit the unused monthly amount and start a fresh annual cycle from the change date.
Free trials: An upgrade during a trial normally just changes the plan the customer converts to, with no proration needed.
Discounts: Decide whether an existing discount carries over to the new plan and state it in your terms.
Downgrades need more care, because they usually involve money going back to the customer. You have three main options.
| Approach | How it works | Pros | Cons |
|---|---|---|---|
| Downgrade at end of cycle | Customer keeps the current plan until renewal, then moves to the lower plan | No refunds, simple accounting | Customer pays for features they no longer want |
| Credit to account | Unused amount is held as credit and adjusted against future invoices | Keeps revenue in the business, easy to explain | Credit must be tracked carefully |
| Refund | Unused amount is paid back to the customer | Most customer-friendly | Reduces cash, adds refund processing |
End-of-cycle downgrades are the most popular choice for monthly plans. The customer has already paid for the month and the change simply applies from the next renewal.
For annual plans, the amounts are bigger, so offering an account credit or partial refund builds trust and reduces churn.
Whichever you choose, also plan for what the customer loses. If the lower plan has fewer seats, less storage or missing features, tell the customer exactly what will change and when, before they confirm.
Every plan change changes the value of what you've billed, so it needs the right GST document. Never edit an invoice that has already been issued.
| Situation | Document to issue | What it does |
|---|---|---|
| Upgrade charged immediately | New tax invoice (or a debit note against the original invoice) | Bills the extra prorated amount with GST |
| Upgrade added to next invoice | Separate line item on the next tax invoice | Includes the prorated charge and its GST in the next bill |
| Downgrade with credit or refund | Credit note against the original invoice | Reduces the taxable value and the GST charged |
| Downgrade at end of cycle | No extra document | The next invoice is simply raised at the new plan price |
Keep these points in mind:
Because GST rules are updated from time to time, confirm your process with your CA or the official GST portal.
Mocha QuickBill takes the maths and the paperwork out of subscription changes, so you can say yes to every upgrade without opening a spreadsheet.
Automatic proration: QuickBill calculates the prorated charge or credit based on the days remaining in the billing cycle.
Flexible timing: Apply changes immediately or schedule them for the next renewal date.
Upgrades, downgrades, and seat changes: Handle plan switches, add-ons and changes in user count from one place.
GST-ready documents: Generate the right tax invoice or credit note, with CGST, SGST, or IGST applied correctly.
Clear, itemized invoices: Customers see exactly what they were credited and charged, line by line.
Customer management: Every customer's plan history, invoices and credits are recorded in one place.
With QuickBill, plan changes become a routine part of billing, not a monthly headache.
Customers' needs change, and your billing should change with them. A clear proration policy, instant upgrades, fair downgrades, and the right GST documents turn plan changes from a source of confusion into a smooth part of the customer experience.
Get it right, and upgrading becomes the easiest thing a customer can do.
Want plan changes to take care of themselves? Try Mocha QuickBill free and automate proration, upgrades, and downgrades from day one.
Prorated billing means charging a customer only for the part of a billing period they used on a plan, instead of the full period price.
In most cases, yes. Prorating upgrades lets customers get more value immediately while paying only for the time left in the cycle.
No. Many businesses apply downgrades at the end of the billing cycle, or give an account credit instead of a cash refund. Whatever you choose, state it clearly in your terms.
Yes. The prorated charge is taxable, so GST applies at the same rate as the plan. For a credit, the GST is reduced through a credit note.
The usual approach is to credit the unused part of the current monthly period and start a new annual cycle from the date of the change.
Yes. Multiply the change in seats by the per-seat price, then by the share of the billing cycle remaining.