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Glossary · GST & Billing

What is Reverse Charge Mechanism (RCM)?

Reverse Charge Mechanism (RCM) under GST meaning — when the recipient, not the supplier, must pay GST — with notified categories and an example.

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Reverse Charge Mechanism (RCM) — meaning

Under the Reverse Charge Mechanism (RCM), the recipient of goods or services — instead of the supplier — is liable to pay GST directly to the government.

What is reverse charge?

Normally, the supplier of goods or services collects GST from the recipient and deposits it with the government. Under the Reverse Charge Mechanism (RCM), this liability shifts to the recipient, who must pay GST directly to the government instead of to the supplier. RCM applies in specific situations notified under Sections 9(3) and 9(4) of the CGST Act, 2017 (and corresponding provisions in the IGST Act).

When reverse charge applies

  • Supply of specified goods or services notified by the government under Section 9(3), regardless of the supplier's registration status (for example, certain services from goods transport agencies, legal services from advocates, and specified categories under notifications).
  • Supply of goods or services by an unregistered supplier to a registered person, under Section 9(4), in categories notified by the government for this provision.
  • A registered person liable under RCM must self-invoice in specified cases and pay tax even if the transaction value is small.

How RCM works

The recipient calculates and pays the applicable GST on the specified inward supply directly to the government, and can typically claim input tax credit for that tax paid, subject to the usual ITC conditions.

Example: a company that receives legal services from an individual advocate (a Section 9(3) notified category) must self-assess and pay GST under RCM on that service, rather than the advocate charging GST on the invoice.

Common mistakes

  • Not identifying that a purchase falls under an RCM-notified category and failing to self-pay the tax.
  • Forgetting to issue a self-invoice and payment voucher as required for RCM transactions.
  • Missing the claim of eligible ITC on tax paid under RCM in the correct return period.

Sources

Last updated 2026-10-12.

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Related terms

Input Tax Credit (ITC)Input Tax Credit (ITC) is the credit a GST-registered business can claim for the GST it paid on purchases of goods/services used for business, which it can set off against the GST it owes on sales.Tax InvoiceA GST tax invoice is the primary document a registered supplier issues for a taxable supply of goods or services, containing the prescribed details needed for GST compliance and the recipient's input tax credit.GSTR-3BGSTR-3B is a self-declared summary GST return where a registered business reports total outward and inward supplies, tax liability and input tax credit, and pays the net GST due.

Reverse Charge Mechanism (RCM) — FAQs

Who pays GST under reverse charge?+

The recipient of the notified goods or services pays GST directly to the government under reverse charge, instead of the supplier collecting and remitting it.

Can input tax credit be claimed on tax paid under RCM?+

Yes, generally the recipient can claim input tax credit on GST paid under reverse charge, subject to the standard ITC conditions under Section 16 of the CGST Act.

What triggers reverse charge on supplies from unregistered persons?+

Section 9(4) of the CGST Act empowers the government to notify specific categories of goods or services where a registered recipient must pay GST under reverse charge when buying from an unregistered supplier — check the current notified list on cbic-gst.gov.in.

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