RCM Entry 3 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The interesting thing about Entry 3 is not the charge. It is the reasoning that makes the charge possible at all — because Schedule III appears, at first reading, to put the whole subject outside GST.
Entry 3 of Notification No. 13/2017-CT(Rate) puts tax on "services supplied by an arbitral tribunal to a business entity" in the hands of any business entity located in the taxable territory. Arbitral tribunal takes its meaning from clause (d) of section 2 of the Arbitration and Conciliation Act, 1996 — a sole arbitrator or a panel of arbitrators. Schedule III to the CGST Act treats services by any court or tribunal established under any law as neither a supply of goods nor of services, but an arbitral tribunal is the creature of an agreement, not of a statute, so it falls outside that carve-out. Entry 45(a) of Notification No. 12/2017-CT(Rate) then exempts arbitral tribunal services to non-business persons, small business entities and government.
The Schedule III question, and the answer
Schedule III read with section 7 of the CGST Act lists activities that are neither a supply of goods nor a supply of services. Among them: services by any court or tribunal established under any law for the time being in force.
If that reached arbitration, Entry 3 would have nothing to operate on. The Handbook's analysis explains why it does not: "The word Tribunal does not cover the Arbitral Tribunal since the Arbitral Tribunal is the creature of an agreement and not established under any law."
The distinction is between a forum created by statute and a forum created by contract. A National Company Law Tribunal, a GST Appellate Tribunal, an Income Tax Appellate Tribunal — each exists because a statute created it. An arbitral tribunal exists because parties agreed to it; the Arbitration and Conciliation Act, 1996 supplies the framework within which their agreement operates, but it does not establish the tribunal.
Hence the levy stands, and the charge sits on the recipient.
Who counts as an arbitral tribunal
By clause (i) of the definitions in Notification No. 12/2017-CT(Rate), "arbitral tribunal" has the meaning assigned in clause (d) of section 2 of the Arbitration and Conciliation Act, 1996, which provides that an arbitral tribunal means a sole arbitrator or a panel of arbitrators.
Two consequences follow.
First, a sole arbitrator is squarely inside the entry. There is no minimum constitution requirement, and no distinction between an institutional appointment and an ad hoc one.
Second, the arbitrator's own professional identity is irrelevant. A retired judge, a practising advocate, a chartered accountant or an engineer sitting as arbitrator supplies the service as an arbitral tribunal. If the same person separately gives legal advice as an advocate, that is Entry 2 territory; sitting as arbitrator, it is Entry 3.
The exemption: entry 45(a)
Entry 45(a) of Notification No. 12/2017-CT(Rate) (heading 9982 or 9991) exempts services by an arbitral tribunal to:
- any person other than a business entity;
- a business entity with an aggregate turnover in the preceding financial year up to the amount that makes it eligible for exemption from registration under the CGST Act; or
- the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity.
As with legal services, the threshold limb is self-updating. Up to 30.09.2019 it read "twenty lakh rupees (ten lakh rupees in the case of special category States) in the preceding financial year"; Notification No. 21/2019-CT(Rate) dated 30.09.2019 substituted a reference to the registration threshold, so a change in the section 22 limit flows through without amending the entry.
The practical result is the mirror of Entry 2. A commercial arbitration between two substantial companies produces reverse charge in the hands of the business entity. An arbitration involving a consumer, a small business below the threshold, or a government party produces an exempt supply.
Where both parties are business entities
Arbitration differs from litigation in one commercially important way: the tribunal's fees are usually shared, often equally, between claimant and respondent.
Entry 3 does not apportion. It taxes the supply to a business entity, and where the tribunal renders its account to each party for that party's share, each business entity is the recipient of the service it pays for and discharges reverse charge on its own share. Where one party pays the whole and recovers a share from the other, the recovery is a separate question of value and consideration between the parties, not a reallocation of the reverse charge.
The compliance chain
The mechanics are the same as for any section 9(3) service where the supplier is unregistered — which an arbitrator very often is:
- Self-invoice under section 31(3)(f) on the date of receipt of the service, where the arbitrator is unregistered;
- Payment voucher under section 31(3)(g) at the time of payment;
- Time of supply under section 13(3) — the earlier of the date of payment entered in the books or debited to the bank account, the day after sixty days from the arbitrator's invoice where the arbitrator is required to issue one, or the date of the recipient's own invoice where the recipient is the one to issue it;
- Payment in cash under rule 85(4), and credit in the same month if otherwise eligible;
- Reported in Table 3.1(d) of GSTR-3B with the credit in Table 4(A)(3).
The arbitrator, if supplying only RCM services, need not register — section 23(2) read with Notification No. 5/2017-Central Tax dated 19.06.2017.
Key takeaways
- Entry 3 works because an arbitral tribunal is created by agreement, not established under a law, so the Schedule III carve-out for courts and tribunals does not reach it.
- Arbitral tribunal = a sole arbitrator or a panel, borrowed from section 2(d) of the Arbitration and Conciliation Act, 1996.
- The arbitrator's own profession is irrelevant — the capacity in which the service is supplied decides the entry.
- Entry 45(a) exempts arbitration services to non-business persons, small business entities below the registration threshold, and government bodies.
- Where fees are shared, each business entity discharges reverse charge on its own share.
- An arbitrator supplying only RCM services is exempt from registration.
Read next
- RCM Entry 2: Legal Services, and Why "Business Entity" Decides Everything
- RCM Entry 4: Sponsorship, and the Body Corporate Exclusion of 2025
- ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route
Disclaimer: Positions stated as on 5 September 2026, based on entry 3 of Notification No. 13/2017-Central Tax (Rate), entry 45(a) of Notification No. 12/2017-Central Tax (Rate) as amended by Notification No. 21/2019-Central Tax (Rate), Schedule III to the CGST Act, 2017 and section 2(d) of the Arbitration and Conciliation Act, 1996, as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).