Does spring stop applying force just after we cut it?
No. Immediately after cutting, the spring still is stretched by the same percentage that it was before cutting, so it still applies the same force to the block as before. (But the upper part of the spring no longer applies a force to the lower part, and that is crucial for a different point of view, explained further below.)
This time span of force applied to the block will last only for a very short period of time, because the spring will quickly return to its "rest" shape, typically with some oscillation. And as soon as the spring reaches that shape, it no longer applies any force. Trying to calculate the behaviour of the spring during that oscillation period can turn out to be quite complex, so we happily accept the approximation that the timespan of this complex process is short enough to be ignored.
So, immediately after cutting, the spring still applies a force to the block, but shortly after cutting, this force is zero.
And if we change our point of view and talk about the system composed of the block plus the small part of the string still attached to it, then the force that the spring applies to the block is completely internal within the system and does not affect the motion of the system as a whole (exactly: its center of gravity).
What matters now, is that the upper part of the spring no longer applies a pulling force to the lower part (and thus the system), so the only remaining force is gravity, meaning that the system (exactly: its center of gravity) will begin a free fall. From that point of view, it does not matter if the spring-block system then develops some internal oscillation, rotation or whatever. And if we can neglect the mass of the still-attached spring part, the whole-system movement nearly perfectly describes the block movement.