RCM 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.
Six entries in Notification No. 13/2017-CT(Rate) share one design. Each takes a large, fragmented population of individual intermediaries and moves the tax to the single regulated institution at the other end of the transaction. Collecting from one bank is easier than collecting from ten thousand agents.
Entry 7 — an insurance agent to any person carrying on insurance business. Entry 8 — a recovery agent to a banking company, financial institution or NBFC. Entry 10 — members of the Overseeing Committee to the RBI. Entry 11 — an individual Direct Selling Agent, other than a body corporate, partnership or LLP, to a bank or NBFC. Entries 12 and 13 — a business facilitator to a banking company, and an agent of a business correspondent to the business correspondent. In every case the recipient institution located in the taxable territory pays.
Entry 7: insurance agents
The entry covers "services supplied by an insurance agent to any person carrying on insurance business", and the recipient is any person carrying on insurance business, located in the taxable territory.
"Insurance agent" is a borrowed definition. Clause (f) of the explanation to Notification No. 13/2017-CT(Rate) adopts clause (10) of section 2 of the Insurance Act, 1938: an insurance agent is one who receives or agrees to receive payment by way of commission or other remuneration in consideration of soliciting or procuring insurance business, including business relating to the continuance, renewal or revival of policies.
Two features of that definition do real work.
First, it is about the function, not the licence. A person who solicits or procures insurance business for commission is an insurance agent for this entry, however the arrangement is described.
Second, renewal and revival commission is inside it. Trail commission on the continuance of a policy is expressly within the definition, so it does not fall away when the initial procurement is long past.
The recipient limb is deliberately wide — "any person carrying on insurance business", not "an insurer" — so it reaches whoever is carrying on the business in the taxable territory.
Entry 8: recovery agents
The entry covers "services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company".
Banking company takes the meaning in clause (a) of section 45A of the Reserve Bank of India Act, 1934 (by paragraph 2(l) of Notification No. 12/2017-CT(Rate)) — which is a banking company as defined in section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India, any subsidiary bank under the State Bank of India (Subsidiary Banks) Act, 1959, any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and any other financial institution notified by the Central Government.
Non-banking financial company takes the meaning in clause (d) to section 13(8) of the IGST Act: a financial institution which is a company; a non-banking institution which is a company whose principal business is receiving deposits under any scheme or arrangement or in any manner, or lending in any manner; or such other non-banking institution or class of institutions as the RBI may specify with the previous approval of the Central Government.
Note that Entry 8 does not qualify the supplier. Unlike Entry 11, it does not exclude a body corporate — a recovery agency constituted as a company is still inside the entry, and the bank pays.
Entry 10: the RBI's Overseeing Committee
The narrowest entry in the notification: supply of services by the members of the Overseeing Committee constituted by the Reserve Bank of India, to the Reserve Bank of India.
The Handbook explains why it exists. Two exemptions were withdrawn — S. No. 26 of Notification No. 12/2017-CT(Rate) (services by the Reserve Bank) and S. No. 42 of Notification No. 09/2017-Integrated Tax (Rate) (services received by the RBI in relation to management of foreign exchange reserves). Taxability was then introduced "to node the broken chain of availing ITC on such services" — that is, to restore a credit chain that the exemptions had severed.
Entry 11: individual DSAs, and why the legal form decides it
The entry covers "services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs)", with the banking company or NBFC located in the taxable territory liable.
DSAs are not defined under the CGST Act. The Handbook describes the function in general parlance: they bring direct business to the institutions they represent, identifying potential customers for the bank or NBFC, guiding borrowers through the loan application process and ensuring the documentation is complete and accurate.
The entry turns wholly on the supplier's legal form:
- Supplier is a body corporate, partnership firm or LLP → forward charge, the DSA charges GST.
- Supplier is anyone else — an individual or a proprietorship → reverse charge, the bank or NBFC pays.
This is the cleanest bright-line test in the notification, and it should drive the onboarding paperwork of every lender. A bank's DSA master file needs the constitution of each agent recorded, because that field alone decides the charge.
Entries 12 and 13: business facilitators and business correspondents
Entry 12 — services provided by a business facilitator (BF) to a banking company, the banking company in the taxable territory being liable. Entry 13 — services provided by an agent of a business correspondent (BC) to the business correspondent, the BC in the taxable territory being liable.
Both were inserted by Notification No. 29/2018-CT(Rate) dated 31.12.2018, w.e.f. 01.01.2019.
Circular No. 86/05/2019-GST dated 01.01.2019 explains the model, following RBI Circular DBOD. No. BL.BC. 58/22.01.001/2005-2006 dated 25.01.2006:
- Banks may pay a reasonable commission or fee to the BC, reviewed periodically. The bank's agreement with the BC specifically prohibits the BC from directly charging any fee to customers for services rendered on the bank's behalf. Banks, and not BCs, are permitted to collect reasonable service charges from customers, transparently.
- Therefore the banking company is the service provider in the BF or BC model. The banking company is liable to pay GST on the entire value of the service charge or fee charged to customers, whether or not received via the business facilitator or business correspondent, under reverse charge.
The rural exemption is what makes or breaks most files. Under S. No. 39 of Notification No. 12/2017-CT(Rate), services by a BF or BC to a banking or insurance company with respect to accounts in a rural area branch, and intermediary services ancillary to such supply, are exempt. Rural areas are defined by RBI guidelines.
The Handbook's illustration puts both limbs together. A bank appoints Mr Raj as a business correspondent, earning ₹50,000 per month:
- If he serves a rural area, no GST is charged, no registration is required of him, and no RCM liability arises for the bank.
- If he serves an urban area, the transaction is under reverse charge — the bank issues a self-invoice, pays the tax, and claims the credit.
The Handbook's caution is worth heeding: each case must be analysed against the conditions of the exemption; otherwise the liability arises under Entry 12.
What these entries have in common
The institution is always the payer. Whichever of the six applies, the tax lands on a bank, an NBFC, an insurer or the RBI — entities that are registered, that file monthly, and that can absorb the compliance.
The suppliers are usually unregistered, and often outside registration altogether: by section 23(2) read with Notification No. 5/2017-Central Tax dated 19.06.2017, a person making only supplies whose whole tax is payable by the recipient under section 9(3) is exempt from obtaining registration. An agent whose entire income is commission from one bank need not register at all.
Which means the institution self-invoices. Section 31(3)(f) requires an invoice for supplies received from an unregistered supplier, and section 31(3)(g) a payment voucher on payment. For a bank with thousands of agents, the second proviso to rule 46 matters: a consolidated invoice at the end of a month is permitted for supplies covered by section 9(4) — note that limb is section 9(4), not 9(3), so it does not relieve the section 9(3) entries discussed here.
Key takeaways
- Entry 7 — insurance agent, defined by section 2(10) of the Insurance Act, 1938, which expressly includes renewal and revival commission.
- Entry 8 — recovery agent to a bank, financial institution or NBFC; the entry does not exclude corporate recovery agencies.
- Entry 10 — RBI Overseeing Committee members, introduced to repair a broken ITC chain after two exemptions were withdrawn.
- Entry 11 — DSAs: body corporate, firm or LLP = forward charge; anyone else = reverse charge.
- Entries 12 and 13 — the banking company is treated as the service provider in the BF/BC model and pays on the entire fee charged to customers — Circular No. 86/05/2019-GST.
- S. No. 39 exempts BF/BC services relating to rural area branch accounts.
- Agents supplying only RCM services are exempt from registration.
Read next
- RCM Entry 16: Lending of Securities Under the SEBI Scheme
- RCM Entry 6: Director Services and the Personal-Capacity Line
- ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route
Disclaimer: Positions stated as on 5 September 2026, based on entries 7, 8, 10, 11, 12 and 13 of Notification No. 13/2017-Central Tax (Rate), S. Nos. 26 and 39 of Notification No. 12/2017-Central Tax (Rate), section 2(10) of the Insurance Act, 1938, section 45A of the Reserve Bank of India Act, 1934, section 13(8)(d) of the IGST Act, 2017 and Circular No. 86/05/2019-GST, as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).