GST Compliance Guide · FY 2025-26

Reverse Charge (RCM)
Under GST — Who Pays?

When GST is paid by the recipient instead of the supplier: the full list of notified services and goods under Section 9(3)/9(4), when you can claim ITC, self-invoicing and how to report RCM in your returns.

Updated for FY 2025-26 GST Expert Reviewed GST 2.0 aligned

Talk to a GST Expert See RCM list

9(3)Notified supplies

9(4)From unregistered

CashRCM paid in cash

ITCSelf-assessed

Quick Answer

Under the Reverse Charge Mechanism (RCM), the recipient of goods or services pays GST directly to the government instead of the supplier. RCM applies to notified supplies under Section 9(3) (GTA freight, legal, security, director, import of services and more) and to certain supplies from unregistered persons under Section 9(4) (currently restricted, mainly real-estate promoters). The recipient self-assesses the tax, pays it in cash, and can usually claim it back as Input Tax Credit.

Who pays Recipient

Notified · s.9(3) RCM

From unregistered · s.9(4) Limited

ITC Yes*

The basics

What Is Reverse Charge Mechanism (RCM)?

Normally the supplier collects GST on the invoice and remits it (forward charge). Under RCM that duty shifts to the recipient, who must self-assess the tax, pay it and report it in GSTR-3B. Two provisions of the CGST Act govern it:

Section 9(3) — a notified list of goods and services on which RCM applies regardless of the supplier's registration status.
Section 9(4) — specified supplies received by a registered person from an unregistered person; currently narrowed mainly to real-estate promoters buying shortfall inputs.

RCM is unchanged by GST 2.0 in principle

The GST 2.0 rate rationalisation (effective 22 September 2025) moved goods and services into a two-slab 5%/18% structure but did not remove the reverse-charge framework. What changed for RCM users is mostly the GTA option: the default 5% RCM (no ITC for the GTA) continues, while a GTA can now opt for 18% forward charge with full ITC (replacing the earlier 12% option).

Section 9(3) services

Which Services Are Covered Under RCM?

The main notified services under Notification 13/2017-CT(R) where the recipient pays GST under reverse charge:

Service	Supplier	Recipient (pays tax)	RCM
Goods Transport Agency (GTA) freight	GTA	Factory, society, company, firm, registered person	Yes · 5%
Legal services by an advocate / firm	Individual advocate or firm	Any business entity	Yes
Services by a director	Director (personal capacity)	Company or body corporate	Yes
Security services (supply of manpower)	Any person (non-body-corporate)	Registered person	Yes
Renting of motor vehicle (passenger)	Any person (non-body-corporate)	Body corporate	Yes
Insurance agent services	Insurance agent	Insurance company	Yes
Recovery agent services	Recovery agent	Bank / NBFC	Yes
Services by author / music composer	Author, composer, etc.	Publisher / music company	Yes
Import of services	Person outside India	Indian recipient (IGST)	Yes
Sponsorship by a body corporate	Body corporate	Recipient	No · FCM

Sponsorship provided by a body corporate moved from reverse charge to forward charge w.e.f. 16 Jan 2025 (55th GST Council). Sponsorship by other persons to a body corporate / partnership firm may still attract RCM — confirm the exact fact pattern.

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Section 9(3) goods

Which Goods Are Covered Under RCM?

A small notified list of goods under Notification 4/2017-CT(R) attracts reverse charge — mostly agricultural produce bought from an agriculturist:

Goods	Supplier	Recipient (pays tax)
Cashew nuts (not shelled / peeled)	Agriculturist	Any registered person
Bidi wrapper (tendu) leaves	Agriculturist	Any registered person
Tobacco leaves	Agriculturist	Any registered person
Raw cotton	Agriculturist	Any registered person
Silk yarn	Manufacturer of silk yarn	Any registered person
Used vehicles / old & used goods	Central/State Govt, UT, local authority	Any registered person
Priority Sector Lending Certificate	Any registered person	Any registered person

The 9(4) rule

RCM on Purchases from Unregistered Persons

The broad Section 9(4) RCM on all purchases from unregistered suppliers was suspended long ago. Today it is notified only for specified cases — chiefly a real-estate promoter who must buy at least 80% of inputs from registered suppliers and pay RCM on any shortfall (and on cement/capital goods from unregistered suppliers). It does not apply to ordinary businesses buying from small unregistered vendors.

Don't over-apply 9(4)

A common error is charging yourself RCM on every purchase from an unregistered supplier. That universal rule is not in force. Section 9(4) applies only to notified categories (mainly real-estate promoters). Applying it wrongly inflates your cash outflow — always check whether the supply is actually notified.

Credit rules

Can You Claim ITC on RCM Tax?

Yes — the recipient who pays GST under RCM can usually claim it back as Input Tax Credit, provided the supply is used for business, the recipient is otherwise eligible (not a composition dealer, not a blocked credit under Section 17(5)), the tax has been paid in cash, and a self-invoice was issued for unregistered-supplier purchases.

Situation	ITC on RCM?	Note
Registered business, business-use supply	Yes	Claim in the same period the tax is paid
GTA at 5% RCM	Yes	Recipient can claim the 5% RCM as ITC
Composition dealer	No	Must pay RCM but cannot claim ITC
Blocked credit u/s 17(5)	No	e.g. certain motor-vehicle / personal-use supplies

* ITC eligibility depends on business use and Section 17(5). RCM liability itself must always be paid in cash — it cannot be set off against your credit ledger.

Step by step

How to Pay & Report RCM in GST Returns

Issue self-invoiceFor supplies from unregistered persons

→

Pay in cashRCM cannot be paid using ITC

→

GSTR-3B 3.1(d)Report inward RCM supplies

→

GSTR-3B 4(A)(3)Claim eligible ITC on RCM

Identify supplies notified under 9(3)
Check if any 9(4) category applies
Issue self-invoice + payment voucher (unregistered)
Compute RCM liability at the correct rate
Pay RCM through the electronic cash ledger
Report outward RCM in GSTR-3B Table 3.1(d)
Claim eligible ITC in Table 4(A)(3)
Keep supplier invoices marked "tax payable on reverse charge"

RCM must be paid in cash — always

You cannot use your electronic credit (ITC) ledger to discharge an RCM liability. It must be paid through the electronic cash ledger. You may then claim it back as ITC in the same return (if eligible) — but the payment leg is always cash.

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Government sourcesServices under RCM: Notification 13/2017-CT(R), cbic-gst.gov.in · Goods under RCM: Notification 4/2017-CT(R) · Section 9(3) & 9(4), CGST Act 2017; ITC block u/s 17(5) · Portal & returns: gst.gov.in · GST 2.0 (56th Council, eff. 22 Sep 2025) — GTA rate options

Reverse Charge (RCM) — Frequently Asked Questions

Basics

What is reverse charge mechanism (RCM) under GST?

Reverse charge means the recipient of goods or services pays GST directly to the government instead of the supplier. It applies to notified supplies under Section 9(3) of the CGST Act (such as GTA freight, legal, security and director services and import of services) and to certain supplies from unregistered persons under Section 9(4). The recipient self-assesses the tax, pays it in cash and reports it in GSTR-3B, and can usually claim it back as Input Tax Credit if used for business.

Who pays GST under reverse charge?

The recipient pays. Under RCM the supplier does not charge GST on the invoice; instead the registered recipient self-assesses the tax, pays it to the government through the electronic cash ledger, and reports it in Table 3.1(d) of GSTR-3B. The supplier issues an invoice marked "tax is payable on reverse charge basis".

What is the difference between forward charge and reverse charge?

Under forward charge (the normal rule) the supplier collects GST from the buyer and pays it to the government. Under reverse charge the responsibility shifts to the recipient, who pays the tax directly. RCM is applied only to specific notified supplies or to certain supplies from unregistered persons.

Services & Goods

Which services are covered under RCM?

Key services under Notification 13/2017-CT(R) include Goods Transport Agency (GTA) freight, legal services by an advocate or firm, services by a director to the company, security (manpower) services, renting of a passenger motor vehicle to a body corporate, insurance agent and recovery agent services, services by an author or music composer, and import of services. The exact recipient category is notified for each service.

Is RCM applicable on GTA (transport) services after GST 2.0?

Yes. The default for Goods Transport Agency freight remains 5% under RCM, paid by the recipient (factory, society, company, firm, body corporate or registered person). Under GST 2.0 from 22 September 2025 a GTA can instead opt for 18% forward charge with full ITC, which replaced the earlier 12% option. If the GTA has not opted for forward charge, the recipient pays 5% RCM.

Which goods are covered under RCM?

A short notified list under Notification 4/2017-CT(R) — mainly agricultural produce bought from an agriculturist: cashew nuts (not shelled/peeled), bidi wrapper (tendu) leaves, tobacco leaves, raw cotton and silk yarn, plus used vehicles and old/used goods supplied by government, and Priority Sector Lending Certificates.

Did sponsorship services change under RCM?

Yes. Following the 55th GST Council, sponsorship services supplied by a body corporate were moved from reverse charge to forward charge with effect from 16 January 2025 — so the body-corporate supplier now charges GST normally. Sponsorship supplied by other persons to a body corporate or partnership firm may still attract RCM, so confirm the exact fact pattern.

Unregistered Purchases

Does RCM apply to all purchases from unregistered persons?

No. The broad Section 9(4) RCM on all purchases from unregistered suppliers was suspended long ago. Today it is notified only for specific cases — chiefly a real-estate promoter who must buy 80% of inputs from registered suppliers and pay RCM on the shortfall (and on cement/capital goods from unregistered suppliers). Ordinary businesses do not pay RCM on every purchase from a small unregistered vendor.

Do I need a self-invoice for RCM purchases?

Yes, for supplies received from an unregistered person on which you pay RCM, you must issue a self-invoice and, on payment, a payment voucher. This self-invoice is the document that supports your Input Tax Credit claim on the RCM tax paid.

ITC

Can I claim ITC on tax paid under RCM?

Yes, in most cases. A registered recipient who pays GST under RCM can claim it as Input Tax Credit in the same tax period the tax is paid, provided the supply is used for business, the recipient is not a composition dealer, and the credit is not blocked under Section 17(5). The self-invoice (for unregistered purchases) or the supplier invoice supports the claim.

Can I pay RCM using my ITC balance?

No. RCM liability must always be discharged in cash through the electronic cash ledger — you cannot set it off using the balance in your electronic credit (ITC) ledger. After paying in cash you may then claim that tax back as ITC in the same GSTR-3B, if you are eligible.

Can a composition dealer pay RCM?

Yes. Even a composition dealer must pay GST under RCM on inward supplies that attract reverse charge, at the normal (not composition) rate. However, a composition dealer cannot claim Input Tax Credit on the RCM tax paid — it becomes a cost.

Compliance

How do I report RCM in GSTR-3B?

Report the outward RCM liability on inward supplies in Table 3.1(d) of GSTR-3B (covering both registered and unregistered suppliers), pay it in cash, and then claim the eligible Input Tax Credit in Table 4(A)(3). Keep the supplier invoices marked for reverse charge, plus any self-invoices for unregistered purchases.

Is RCM applicable on import of services?

Yes. Import of services for a business purpose — including from an associated enterprise — is liable to IGST under reverse charge. The Indian recipient must self-assess and pay IGST under RCM and can claim it as ITC if used for business and not blocked.

How is the time of supply determined under RCM?

For services under RCM, the time of supply is the earlier of the date of payment or 60 days from the date of the supplier's invoice. For goods under RCM, it is the earliest of the date of receipt of goods, the date of payment, or 30 days from the date of the supplier's invoice.

Does the supplier mention RCM on the invoice?

Yes. A supplier making a supply liable to reverse charge must state "tax is payable on reverse charge basis" on the invoice and must not charge GST on it. The recipient then self-assesses and pays the tax under RCM.

Done-for-you

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