Reverse Charge Mechanism (RCM) Under GST
Updated June 2026 · VerifiedWhat Is Reverse Charge Mechanism (RCM)?
Normally, the supplier collects GST from the buyer and remits it to the government. Under RCM, this responsibility shifts to the recipient. The recipient must self-assess the tax, pay it, and report it in their GSTR-3B. RCM is governed by:
- Section 9(3) – Notified categories of goods and services where RCM applies regardless of supplier registration status.
- Section 9(4) – Supplies received by a registered person from an unregistered person (applicable for specified categories).
Which Services Are Covered Under RCM?
| Service | Supplier | Recipient (Pays Tax) |
|---|---|---|
| Goods Transport Agency (GTA) services | GTA | Factory, registered society, company, partnership, etc. |
| Legal services by advocate | Individual advocate / firm | Any business entity |
| Sponsorship services | Any person | Body corporate or partnership firm |
| Services by a director | Director (personal capacity) | Company or body corporate |
| Insurance agent services | Insurance agent | Insurance company |
| Recovery agent services | Recovery agent | Banking company or NBFC |
| Renting of motor vehicle | Any person (non-body corporate) | Body corporate |
| Security services | Any person (non-body corporate) | Registered person (body corporate) |
| Services by author / music composer | Author, music composer, etc. | Publisher, music company, etc. |
Which Goods Are Covered Under RCM?
| Goods | Supplier | Recipient (Pays Tax) |
|---|---|---|
| Cashew nuts (not shelled or peeled) | Agriculturist | Any registered person |
| Bidi wrapper leaves (tendu) | Agriculturist | Any registered person |
| Tobacco leaves | Agriculturist | Any registered person |
| Silk yarn | Any person who manufactures silk yarn | Any registered person |
| Raw cotton | Agriculturist | Any registered person |
| Used vehicles, old and used goods | Central/State Govt, UT, local authority | Any registered person |
| Priority Sector Lending Certificate | Any person | Any registered person |
Can You Claim ITC on RCM?
Yes. The recipient who pays GST under RCM can claim Input Tax Credit of the tax paid, provided:
- The goods or services are used for business purposes (furtherance of business).
- The recipient is otherwise eligible to claim ITC (not under composition scheme, not blocked credit).
- The tax has been paid to the government.
- The self-invoice has been issued (for purchases from unregistered suppliers).
How to Report RCM in GST Returns?
- GSTR-3B Table 3.1(d): Report inward supplies attracting reverse charge — both from registered and unregistered suppliers.
- GSTR-3B Table 4(A)(3): Claim ITC on RCM paid.
- Self-invoice: For supplies from unregistered persons, the recipient must issue a self-invoice and a payment voucher.
- RCM liability must be paid in cash — it cannot be offset using ITC from the electronic credit ledger.
Frequently Asked Questions
Does RCM apply to all purchases from unregistered persons?
No. Section 9(4) RCM on purchases from unregistered persons is currently applicable only to specified categories such as real estate (cement, sand, etc., from unregistered suppliers by promoters). It does not apply universally to all unregistered purchases.
Can a composition dealer pay tax under RCM?
Yes. Even composition dealers must pay GST under RCM on inward supplies that attract reverse charge. However, they cannot claim ITC on the RCM tax paid.
Is RCM applicable on import of services?
Yes. Import of services from an associated enterprise or from any person outside India for business purposes is liable to GST under RCM. The Indian recipient must pay IGST under reverse charge.
How is the time of supply determined for 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, it is the earlier 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 need to mention RCM on their invoice?
Yes. The supplier must mention “Tax is payable on reverse charge basis” on the invoice. The supplier should not charge GST on such supplies — they issue the invoice without tax, and the recipient self-assesses.