Reverse Charge Mechanism (RCM) under GST, Explained Simply

Forward Charge vs Reverse Charge

Normally, the supplier collects GST from the customer and pays it to the government — this is "forward charge". Under the Reverse Charge Mechanism (RCM), the responsibility flips: the recipient of the goods or services pays GST directly to the government.

When Does RCM Apply?

• Notified supplies (Section 9(3)): Specific goods and services notified by the government, such as services from a Goods Transport Agency (GTA), legal services from an advocate, services from a company director, sponsorship services, and import of services.
• Purchases from unregistered suppliers (Section 9(4)): In certain notified cases (for example, specified inward supplies for real-estate promoters), a registered buyer must pay GST on purchases from unregistered persons.

Self-Invoicing

When you buy from an unregistered supplier under RCM, the supplier cannot issue a tax invoice. You, the registered recipient, must raise a self-invoice and a payment voucher for the transaction.

Paying Tax and Claiming ITC

RCM liability must be paid in cash — you cannot use Input Tax Credit (ITC) to discharge it. Once paid, you can usually claim ITC of that same tax in a later return, provided the inward supply is used for business and is otherwise eligible.

Note: The list of RCM supplies is updated by notification. Always check the current notified list before deciding RCM applies.