RCM on Agricultural Goods: Notification No. 4/2017, Entry by Entry

RCM on Agricultural Goods 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.

There are only five entries here, and the way to read them is by the supplier column, not the goods column. Four require an agriculturist; one requires a silk yarn manufacturer; one requires merely an unregistered person. Get the supplier wrong and the charge falls on the wrong party.

Notification No. 4/2017-Central Tax (Rate) and its IGST twin put five categories of goods under section 9(3) reverse charge: cashew nuts, not shelled or peeled (0801); bidi wrapper leaves — tendu (1404 90 10); tobacco leaves (2401); specified essential oils other than of citrus fruit (3301 24 00 and 3301 25 series) — entry 3A; silk yarn (5004 to 5006); and raw cotton (5201) — entry 4A. In every case the recipient is "any registered person".

The table, and why the supplier column is the test

In all six rows the recipient is "any registered person".

Entry 3A is the odd one out, twice over. Its supplier is any unregistered person — not necessarily an agriculturist — and it is the only entry in this set where the trigger is registration status rather than occupation. The same essential oils are also on the Notification No. 01/2023-Integrated Tax list of goods that cannot be exported on payment of IGST.

Entry 4 is not agricultural at all in form. The supplier must be a manufacturer of silk yarn from raw silk or cocoons — a processing step, not cultivation.

Entry 1: the "not shelled or peeled" condition

The Handbook resolves the phrase through ordinary dictionary meaning:

• "Shelled" — Cambridge: "an activity to remove peas, nuts, etc. from their shells or their natural covering"; Merriam-Webster: "having the natural covering removed".
• "Peeled" — Cambridge: "an activity to remove the skin of fruit and vegetables."

And the conclusion: "if any registered person purchases raw cashew nuts which are directly derived from the tropical tree from an Agriculturist, only then the registered person is required to pay GST under RCM."

So the processing status of the nut decides. Shelled or peeled cashew from the same agriculturist is outside entry 1 and follows the ordinary forward-charge position.

Entry 2: what a bidi wrapper leaf is

The Handbook goes to the Indira Gandhi National Forest Academy for the botany: tendu leaves are the leaves of Diospyros melanoxylon, "used as wrappers of tobacco to produce bidi" — known as "abnus" in Andhra Pradesh, "kendu" in Orissa and West Bengal, "tembru" in Gujarat, "kari" in Kerala, "tembhurni" in Maharashtra and "bali tupra" in Tamil Nadu.

Why this leaf and not others: *"Diospyros Melanoxylon leaf is considered the most suitable wrapper on account of the ease with which it can be rolled and its wide availability. Leaves of many other plants like Butea monosperma, Shorea robusta etc. also find use as Bidi wrappers… but the texture, flavour and workability of diospyros leaves are unmatchable."*

And the operative reading: "if any registered person purchases raw Bidi Wrapper Leaves from the Agriculturist for the purpose of manufacture of Bidi, only then GST under RCM needs to be paid."

Entries 3 and 4A: tobacco leaves and raw cotton

"Tobacco leaves" — Collins: "leaves of the Tobacco Plant used for production of cigarettes and tobacco"; Law Insider: "tobacco leaf (and resulting tobacco by-products), reconstituted tobacco sheets and tobacco work-in-process… used as raw materials for manufacturing tobacco."

The Handbook's reading is the same shape as entry 2: "if a registered person purchases raw tobacco leaves from an Agriculturist for the manufacture of tobacco and cigarettes, only then GST under RCM needs to be paid."

"Raw cotton" — "the soft white downy fibre of these plants which are used to manufacture textiles which are extracted from cotton plants." And: "if a registered person purchases raw cotton from an agriculturist, then GST under reverse charge mechanism is applicable."

Entry 4A is the commonest of the five in practice, because ginning mills and textile units buy directly from farmers at scale.

The three things this notification changes for a buyer

The buyer must self-invoice. Under section 31(3)(f), a recipient liable under section 9(3) receiving from an unregistered supplier must issue a tax invoice himself. An agriculturist within section 23(1)(b) is unregistered, so every purchase from him needs a self-invoice.

The payment voucher is required in both columns, under section 31(3)(g) and rule 52.

The tax is payable in cash, not through credit — and credit of it becomes available only once paid.

And a composition buyer pays at the normal rate. "The composition supplier shall be liable to make payment at the rate applicable on the supply in respect of every inward supply liable to tax under the reverse charge mechanism, regardless of the rate of tax that is applicable on him" — and "the value of such inward supplies would not be included in the aggregate turnover of the composition taxpayer", while no credit is available to him at all.

Time of supply is the earliest of: receipt of the goods; the date of payment as entered in the recipient's books or debited to his bank account, whichever is earlier; or the day following thirty days from the supplier's invoice — failing all three, the date of entry in the recipient's books.

What the notification does not cover

A purchase from a trader. Entries 1, 2, 3 and 4A all require an agriculturist supplier. Raw cotton bought from a commission agent or a trader is not within entry 4A, and forward charge applies.

A purchase by an unregistered buyer. The recipient column reads "any registered person". An unregistered buyer triggers nothing.

Processed forms. Shelled cashew, ginned and baled cotton sold on by a mill, and manufactured tobacco all sit outside these entries.

Key takeaways

• Notification No. 4/2017-CT(R) covers cashew nuts not shelled or peeled, tendu leaves, tobacco leaves, specified essential oils, silk yarn and raw cotton.
• Four entries require an agriculturist supplier; entry 3A requires only an unregistered supplier; entry 4 requires a silk yarn manufacturer.
• The recipient is always "any registered person".
• "Not shelled or peeled" limits entry 1 to raw cashew straight from the tree.
• Tendu is Diospyros melanoxylon; the entry is aimed at leaves bought for bidi manufacture.
• The buyer must issue a self-invoice where the supplier is unregistered, and a payment voucher in every case.
• RCM tax is paid in cash; a composition dealer pays at the normal rate and gets no credit.
• Purchases from traders or commission agents, and of processed forms, fall outside these entries.

Read next

• Section 2(7): Who Is an "Agriculturist" Under GST
• Does an Agriculturist Have to Register for RCM? Section 24 Against Section 23
• Import of Agricultural Services and the IGST Reverse Charge Exemption

Disclaimer: Positions stated as on 5 September 2026, based on Notification No. 4/2017-Central Tax (Rate) and Notification No. 4/2017-Integrated Tax (Rate), sections 9(3), 9(4), 31(3)(f) and (g) and 12(3) of the CGST Act, 2017 and rule 52 of the CGST Rules, 2017, as reproduced in the ICAI Handbook on Applicability of GST on Agricultural Sector (January 2026, law updated to 31 December 2025).