Reverse Charge Mechanism 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.
Under the Reverse Charge Mechanism (RCM), the recipient of goods or services — rather than the supplier — is liable to pay GST. Here is when RCM applies and how to comply.
When RCM applies
- Specified goods and services notified under Section 9(3) (e.g. GTA, legal services, director services)
- Supplies from an unregistered person in certain notified cases
- Import of services
How to comply with RCM
- Pay the GST in cash (RCM liability cannot be paid using ITC)
- Issue a self-invoice for supplies from unregistered persons
- Claim ITC of the RCM tax paid, if eligible
- Report RCM liability and ITC in GSTR-3B
Key point
RCM tax must be paid in cash first; the credit can then be claimed if the supply is used for business, making it broadly tax-neutral for eligible businesses.
Frequently Asked Questions
What is RCM under GST?
A mechanism where the recipient pays GST instead of the supplier, for notified supplies.
Can RCM be paid using ITC?
No — RCM liability must be paid in cash; the ITC can be claimed afterwards if eligible.
Does RCM require a self-invoice?
Yes — for supplies received from unregistered persons under RCM.
Is RCM tax available as ITC?
Yes — the RCM tax paid can be claimed as ITC if used for business and otherwise eligible.
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