Reverse Charge Mechanism (RCM) under GST: When You Pay Tax for the Seller

Normally the seller collects and pays GST. Under the Reverse Charge Mechanism (RCM), that flips — the buyer pays GST directly to the government. It applies to specific notified supplies and to purchases from unregistered dealers in certain cases.

Common supplies under RCM

• Goods transport agency (GTA) services
• Legal services from advocates
• Director's services to a company
• Import of services
• Sponsorship, security services, and other notified categories

How RCM works

1. You receive a supply that falls under RCM.
2. You calculate the GST and pay it in cash (RCM liability can't be set off with ITC).
3. You report it in GSTR-3B under the RCM section.
4. You can then claim that tax as input tax credit (if eligible) in the same return.

Key rules to remember

• RCM must be paid in cash — not via existing ITC balance.
• Issue a self-invoice for RCM purchases from unregistered suppliers.
• RCM applies even if you're under the composition scheme (and you can't claim ITC then).

FAQs

Does RCM increase my cost? No, if you can claim ITC — it's a timing/cash-flow matter.

Is RCM optional? No — where notified, it's mandatory.

Taxwapsi tracks your RCM liability and ITC so nothing slips. Get started.