Peak time water demands cause significant burden to the utility providers in terms of pumping loads. Its coincidence with the peak hours of electricity consumption makes the situation worse. In this paper, we bring forth the requirement as well as the viability of implementing time-varying tariffs in the 'smart water systems'. We present the problem of finding the optimal tariffs as a Stackelberg game between the utility provider and the consumers of water. Further, we propose an algorithm that iterates between the suppliers problem and the consumers problem for finding the optimal tariffs along with a demonstration of its applicability on a small system. © 2017 ACM.