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—gst-reverse-charge-mechanism-rcm-india [2026/07/22 17:45] (current) – created - external edit 127.0.0.1
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 +{{htmlmetatags>metatag-description=(Under reverse charge GST the buyer pays the tax, not the seller. Learn who pays under RCM, which services are covered, and how to register and claim ITC.)&metatag-keywords=(GST reverse charge mechanism, RCM under GST, who pays GST under reverse charge, Section 9 3 CGST, self invoice RCM)&metatag-robots=(index,follow)&metatag-og:title=(GST Reverse Charge Mechanism RCM Explained)&metatag-og:description=(Under reverse charge GST the buyer pays the tax, not the seller. Learn who pays under RCM, which services are covered, and how to register and claim ITC.)&metatag-og:type=(article)}}
 +====== GST Reverse Charge Mechanism RCM - citizen guide 2026 ======
  
 +
 +{{ :social:auto:gst-reverse-charge-mechanism-rcm-india.png?direct&1200 |GST Reverse Charge Mechanism RCM - citizen guide 2026 — RTI Wiki}}
 +
 +Priya, a freelance designer in Pune, hired an advocate for a contract dispute. The lawyer sent a bill with no GST on it. Months later her accountant said she owed that GST herself. She had just met the reverse charge mechanism, where the buyer, not the seller, pays the tax to the government.
 +
 +<WRAP center round box 90%>
 +**Quick Reply:** Under the GST reverse charge mechanism (RCM), the recipient of certain goods or services pays GST directly to the government instead of the supplier collecting it. It applies to notified categories like advocate fees, goods transport, director services and sponsorship. Anyone liable under RCM must register for GST regardless of turnover.
 +</WRAP>
 +
 +===== What is the reverse charge mechanism? =====
 +
 +Reverse charge means the liability to pay GST shifts from the supplier to the recipient of the supply. Normally the seller charges GST on the invoice and deposits it. Under RCM the buyer self-assesses the tax and pays it to the government directly. The supplier does not charge GST on that supply.
 +
 +===== Legal position in India =====
 +
 +The reverse charge mechanism is defined in **Section 2(98) of the CGST Act, 2017**: the liability to pay tax by the recipient instead of the supplier under sub-section 3 or 4 of Section 9.
 +
 +Two routes create an RCM liability:
 +
 +  * **Section 9(3)** - the government notifies specific categories of goods or services where the recipient must pay GST. This does not depend on whether the supplier is registered.
 +  * **Section 9(4)** - RCM on supplies from an unregistered supplier to a registered person. The broad version was suspended; it now applies only to notified classes, mainly promoters in real estate under Notification 07/2019-Central Tax Rate.
 +
 +The notified services list lives in **Notification 13/2017-Central Tax Rate**, as amended. The administering authority is the Central Board of Indirect Taxes and Customs (CBIC), with the GST Council recommending what gets notified.
 +
 +===== Common services where YOU pay under RCM =====
 +
 +These are among the categories notified under Notification 13/2017, where a business recipient pays GST under reverse charge:
 +
 +  * **Goods Transport Agency (GTA)** services for transport of goods by road, received by a registered person or body corporate.
 +  * **Legal services** by an individual advocate, senior advocate or firm of advocates to a business entity.
 +  * **Services by a director** of a company or body corporate, to that company or body corporate.
 +  * **Sponsorship services** supplied to a body corporate or partnership firm.
 +  * **Services by an arbitral tribunal** to a business entity.
 +
 +If you receive any of these, the supplier will not charge you GST. You must pay it yourself.
 +
 +===== Step-by-step: how to handle an RCM liability =====
 +
 +  - **Check if the supply is notified.** Match your purchase against the Section 9(3) services list and the goods list. If it is listed, RCM applies.
 +  - **Register for GST if you are not already.** Under **Section 24 of the CGST Act**, any person required to pay tax under reverse charge must register, regardless of turnover. The Rupee 20 lakh / 40 lakh thresholds do not protect you here.
 +  - **Issue a self-invoice if the supplier is unregistered.** Under **Section 31(3)(f)**, a registered recipient liable under RCM must issue an invoice to himself for goods or services received from an unregistered supplier.
 +  - **Calculate and pay the tax in cash.** The RCM liability must be discharged through the electronic cash ledger. You cannot use existing input tax credit to pay the RCM amount itself.
 +  - **Claim input tax credit afterwards.** Once paid, you can claim that RCM tax as input tax credit if the supply is otherwise eligible, using your self-invoice as the document.
 +  - **Report it in your returns.** Show RCM tax payable in GSTR-3B and your eligible credit in the same return.
 +
 +===== Documents required =====
 +
 +  * GST registration certificate (GSTIN)
 +  * Supplier invoice, or your own self-invoice if the supplier is unregistered
 +  * Payment voucher for the supplier
 +  * Working sheet showing the RCM tax computed and the rate applied
 +  * GSTR-3B acknowledgement showing the RCM tax paid
 +
 +===== Common mistakes =====
 +
 +  * **Assuming the turnover threshold protects you.** Section 24 forces registration the moment you are liable under RCM, even at zero turnover.
 +  * **Paying RCM tax using input tax credit.** The RCM liability must be paid in cash; ITC can only be claimed afterwards.
 +  * **Forgetting the self-invoice** under Section 31(3)(f) when buying from an unregistered supplier, which can block your ITC claim.
 +  * **Treating an advocate or GTA bill as GST-free.** No GST on the invoice does not mean no GST is due - it means you owe it.
 +  * **Missing the RCM entry in GSTR-3B**, leaving an unpaid liability that surfaces during scrutiny.
 +
 +<WRAP center round box>
 +**Real-life example (illustrative):** Aarav runs a small marketing firm in Indore. He pays Rupee 1,00,000 to an advocate for a trademark dispute and Rupee 50,000 to a transporter (GTA) for delivering exhibition stalls. The advocate and GTA bills carry no GST. Because both are notified under Section 9(3), Aarav self-assesses GST at 18 percent on each, deposits the tax in cash through his GST portal, and claims it back as input tax credit in the same GSTR-3B. Net cost to him after credit: nil, but only because he reported it correctly.
 +</WRAP>
 +
 +===== RTI and grievance angle =====
 +
 +If a GST officer disputes your RCM classification, or your input tax credit on RCM tax is stuck, you have escalation routes. You can raise a ticket on the GST self-service helpdesk, lodge a grievance on CPGRAMS (pgportal.gov.in), or write to your jurisdictional GST officer for a written clarification. A written, dated request creates a record you can rely on later.
 +
 +===== Sample grievance letter =====
 +
 +<WRAP center round box>
 +To,
 +The Jurisdictional GST Officer / GST Helpdesk
 +[Office address / ticket portal]
 +
 +Subject: Request for clarification on reverse charge liability and input tax credit - GSTIN [your GSTIN]
 +
 +Respected Sir/Madam,
 +
 +I am a registered taxpayer under GSTIN [number]. I have received [advocate services / GTA services / director services], which I understand fall under reverse charge as per Section 9(3) of the CGST Act, 2017 read with Notification 13/2017-Central Tax Rate.
 +
 +I have paid the applicable GST under reverse charge in cash through my electronic cash ledger for the period [month/year]. However, [my input tax credit on this RCM tax has not reflected / I seek written confirmation that this supply is correctly classified under RCM].
 +
 +I request a written clarification on the above so that my returns are filed correctly. Kindly treat this as a formal grievance and provide a dated reference number.
 +
 +Yours faithfully,
 +[Name / authorised signatory]
 +[GSTIN, date, contact]
 +</WRAP>
 +
 +===== Frequently asked questions =====
 +
 +==== Who pays GST under reverse charge? ====
 +The recipient of the goods or services pays GST directly to the government, instead of the supplier collecting it. This happens only for categories notified under Section 9(3) or supplies covered by Section 9(4).
 +
 +==== Do I have to register for GST just because of RCM? ====
 +Yes. Under Section 24 of the CGST Act, any person required to pay tax under reverse charge must register, even if turnover is below the normal threshold.
 +
 +==== Can I pay RCM tax using my input tax credit? ====
 +No. The reverse charge liability must be paid in cash through the electronic cash ledger. You can claim that tax back as input tax credit afterwards, if the supply is otherwise eligible.
 +
 +==== Is GST on advocate fees paid by the lawyer or by me? ====
 +For legal services by an advocate or firm of advocates to a business entity, the recipient pays under reverse charge. The advocate does not charge GST on the bill.
 +
 +==== When do I need to issue a self-invoice? ====
 +When you receive goods or services under reverse charge from an unregistered supplier, Section 31(3)(f) requires you, the registered recipient, to issue an invoice to yourself.
 +
 +==== Is Section 9(4) reverse charge on all unregistered purchases still in force? ====
 +No. The broad version of Section 9(4) was suspended. It now applies only to notified classes, mainly promoters in real estate under Notification 07/2019-Central Tax Rate.
 +
 +==== What happens if I ignore an RCM liability? ====
 +The unpaid tax can surface during scrutiny or audit, with interest and penalty. You may also lose the input tax credit you would have been entitled to if you had reported it correctly.
 +
 +===== Sources =====
 +
 +  * CGST Act, 2017 - Section 2(98), Section 9, Section 24, Section 31(3)(f) (indiacode.nic.in, cbic-gst.gov.in)
 +  * Notification 13/2017-Central Tax Rate (services under reverse charge), CBIC
 +  * Notification 07/2019-Central Tax Rate (real estate promoters under Section 9(4)), CBIC
 +
 +===== Related links =====
 +
 +  * [[https://righttoinformation.wiki/book|The RTI Playbook]]
 +  * [[https://righttoinformation.wiki/ai-to-draft-your-rti|AI RTI Drafter]]
 +  * [[https://righttoinformation.wiki/tools/first-appeal-app.html|First Appeal Builder]]
 +  * [[https://righttoinformation.wiki/tools/awaaz-rti.html|AwaazRTI voice tool]]
 +  * [[https://righttoinformation.wiki/act|The RTI Act 2005]]
 +===== GST reverse charge mechanism (RCM): Who pays, what services, and how to claim ITC? =====
 +
 +Reverse Charge Mechanism (RCM) under GST shifts the tax liability from supplier to recipient. Here is the complete guide:
 +
 +  - **Step 1: What is RCM?** (a) under normal GST: the supplier charges GST and pays it to the government, (b) under RCM: the recipient pays GST directly to the government (instead of the supplier), (c) RCM applies to specified goods and services, (d) the recipient must register under GST if liable for RCM (even if below the threshold).
 +  - **Step 2: Services under RCM.** (a) GTA (Goods Transport Agency) services, (b) legal services by advocates/law firms, (c) sponsorship services, (d) services by government/local authority to business, (e) director's services to company, (f) insurance agent services, (g) transport of passengers by radio taxi (without input tax credit), (h) services by recovery agents.
 +  - **Step 3: Goods under RCM.** (a) cashew nuts (unshelled), (b) bidi wrapper leaves, (c) tobacco products (unbranded), (d) silk yarn, (e) supply of lottery.
 +  - **Step 4: How to pay RCM.** (a) the recipient must generate a self-invoice (since the supplier is unregistered or not charging GST), (b) pay GST through FORM GST PMT-06, (c) file GSTR-3B showing RCM liability and payment, (d) the recipient can claim ITC on the RCM amount paid (if used for business).
 +  - **Step 5: ITC under RCM.** (a) the recipient can claim ITC on RCM GST paid, (b) the ITC is available in the same month the RCM is paid, (c) for GTA: the recipient can pay under RCM and claim ITC, or the GTA can charge forward GST (5% without ITC), (d) for legal services: the recipient pays RCM and claims ITC.
 +  - **Step 6: Common compliance issues.** (a) failure to register under RCM — even small businesses must register if liable for RCM, (b) failure to pay RCM on time — interest at 18% per annum applies, (c) wrong classification of services under RCM, (d) failure to issue self-invoice, (e) non-filing of GSTR-3B with RCM details.
 +  - **Step 7: File RTI.** File RTI with CBIC (Central Board of Indirect Taxes and Customs) asking for: (a) the total RCM collections, (b) the number of RCM-related notices, (c) common compliance issues identified, (d) the number of registrations triggered by RCM liability.
 +
 +See [[https://righttoinformation.wiki/gst-refund|GST Refund]] and [[https://righttoinformation.wiki/clubbing-section-64|Clubbing of Income]].
 +
 +{{tag>gst reverse charge mechanism rcm itc self invoice gta legal services 2026}}
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