Under the Reverse Charge Mechanism (RCM), the recipient (buyer) pays GST directly to the government instead of the supplier. It applies mandatorily under Section 9(3) for notified services — legal/advocate, Goods Transport Agency (GTA), import of services, security services, renting of motor vehicles and Government services — and under Section 9(4) for notified purchases from unregistered suppliers (e.g. metal scrap). You must pay the RCM tax in cash (not by adjusting existing ITC), and can then claim it back as Input Tax Credit in the same GSTR-3B, making it broadly tax-neutral.
For a registered business RCM is usually a wash: you pay the tax and claim the same amount as ITC. The real impact is timing — the RCM liability must be discharged from your cash ledger (challan PMT-06), and the credit only helps once claimed. ITC is also lost if the supply is blocked under Section 17(5).
RCM Services under Section 9(3)
These services attract mandatory RCM regardless of the supplier’s registration status. The definitive, current list is Notification 13/2017-CT(R) as amended — a few entries changed for FY 2025-26 (see the note below).
| Service | Supplier | Recipient (pays RCM) | Rate |
|---|---|---|---|
| Legal services (incl. representation) | Individual advocate / firm of advocates | Any business entity | 18% |
| Goods Transport Agency (GTA) freight | GTA (transporter) | Factory, registered person, company, society, dealer | 5% RCM · or 12% FCM if GTA opts in |
| Import of services | Supplier outside India | Indian recipient | 18% IGST* |
| Security services (personnel supply) | Any person other than a body corporate | Registered person | 18% |
| Renting of motor vehicles (with fuel) | Any person other than a body corporate | Body corporate | 5% |
| Director’s remuneration (non-employee) | Director | The company (body corporate) | 18% |
| Sponsorship (provider NOT a body corporate) | Non-body-corporate | Company / partnership firm | 18% |
| Government / local authority services | Central/State Govt, local authority | Any business entity | 18% |
*Import-of-service rate is service-specific (18% for most IT/software/consulting). From 16 Jan 2025 (Notif 07/2025-CT(R)) sponsorship provided by a body corporate moved to FORWARD charge — RCM now applies only when the sponsor provider is a non-body-corporate.
Section 9(4) — RCM on Notified Purchases
The original Section 9(4) — RCM on every purchase over ₹5,000/day from unregistered suppliers — was suspended in 2017. Today 9(4) applies only to specific notified categories, so most routine buys from unregistered vendors (stationery, small repairs) carry no RCM.
| Notified 9(4) category | Buyer | RCM? | Rate |
|---|---|---|---|
| Metal scrap (unregistered → registered) | Registered person | Yes | 18% |
| Renting of commercial property (unregistered landlord → registered tenant) | Registered person | Yes | 18% |
| Raw cotton / tobacco leaves / silk yarn (notified goods) | Registered person | Yes | Item rate |
| Ordinary purchases from unregistered vendors | Any | No | — |
Metal scrap RCM: Notification 06/2024-CT(R), effective 10 Oct 2024. Commercial-rent RCM from unregistered landlord: Notification 09/2024-CT(R), effective 10 Oct 2024. Always verify the current CBIC notification for your specific category.
Besides the 18% RCM on scrap bought from an unregistered supplier, a 2% GST-TDS also applies from 10 Oct 2024 on scrap purchased from a registered supplier above the threshold. The two mechanisms cover different supplier types — check whether your seller is registered before deciding RCM vs TDS.
Buying scrap or renting premises from an unregistered party? Get your RCM position checked.
Talk to a GST Expert →How to Pay RCM and Report It
The supplier issues an invoice marked “Reverse Charge Applicable” without GST. You self-assess the tax, pay it in cash, and report both the liability and the credit.
Intra-state — ₹50,000 legal fee
Inter-state / import — ₹50,000
For import of services (AWS, Azure, foreign consulting), value the tax on the INR amount at the RBI reference rate and pay IGST under RCM for the month the service is received or paid, whichever is earlier. See our guide to GST Input Tax Credit and GSTR-3B filing.
RCM & ITC — Key Rules
| Aspect | Rule |
|---|---|
| ITC availability | Claim in the same month RCM is paid — no deferral |
| Payment method | Must be paid from the cash ledger (PMT-06); cannot offset with existing ITC |
| Time limit to claim ITC | By 30 November of next FY or filing of GSTR-9, whichever is earlier |
| Blocked ITC | No ITC if the supply is blocked under Section 17(5) — personal use, certain motor vehicles, food & beverages, etc. |
| Unregistered recipient | If the Indian recipient is unregistered (e.g. import of service for personal use), registration may be required to discharge RCM |
RCM applies when
- You pay a lawyer, GTA, or security agency
- You import a service (cloud, foreign consulting)
- You buy metal scrap or rent from an unregistered party
- You take a car on rent for the company (with fuel)
RCM does NOT apply when
- You buy ordinary goods from an unregistered vendor
- Sponsorship is provided by a body corporate (now FCM)
- The supply is exempt or below the notified trigger
- GST was already charged by the supplier (forward charge)
A common error is netting RCM against the electronic credit ledger. The RCM liability must be paid in cash first; only then does the equal ITC become available. Skipping the cash payment triggers interest and a mismatch notice — even though the net tax is nil.
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Get GST Filing Help →Reverse Charge Mechanism — Frequently Asked Questions
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Reverse Charge, Challans & ITC — Handled
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