What is Reverse Charge?
Under normal GST, the supplier collects tax and pays it. Under RCM, the recipient pays it directly. RCM applies in three situations:
- Section 9(3) — Specific goods and services notified by government
- Section 9(4) — Purchases by registered persons from unregistered (currently suspended for most cases)
- IGST Section 5(3) — Import of services
Key Services Under RCM (Section 9(3))
| Service | Supplier | Recipient liable |
|---|---|---|
| Goods transport agency (GTA) | GTA not opting forward charge | Registered factory/co-op/body corporate |
| Legal services | Individual advocate / firm | Any business entity |
| Director's services | Director (not as employee) | The company |
| Sponsorship | Any person | Body corporate / partnership |
| Insurance agent | Agent | Insurance company |
| Recovery agent | Agent | Bank / FI / NBFC |
| Author/composer royalties | Author / composer | Publisher / producer |
| Renting of motor vehicle with operator | Non-body-corporate, not at 12% with ITC | Body corporate |
| Central/State Govt services (except renting property) | Government | Business entity |
Key Goods Under RCM
- Cashew nuts, bidi wrapper leaves, tobacco leaves, raw cotton, silk yarn — from agriculturist to registered person
- Supply of lottery — by State/UT/local authority to distributor
- Used vehicles, old goods, scrap — by Government to registered person
Time of Supply Under RCM
Earliest of:
- Date of payment to supplier
- 30 days after invoice date (60 days for services)
- Date of receipt of goods (for goods only)
How to Discharge RCM Liability
- Account for the RCM purchase like any other purchase
- Record GST liability under "Reverse Charge" in GSTR-3B Table 3.1(d)
- Pay tax in cash — RCM cannot be paid through ITC
- Claim ITC for the same amount in Table 4(A)(3) — net effect is zero, but cash flow impacted
Self-Invoicing & Payment Voucher
When paying GST under RCM on purchases from unregistered suppliers, you must issue a self-invoice on receipt date. When paying any RCM supplier, issue a payment voucher on payment date.
ITC on RCM
You can claim ITC on RCM payments subject to standard conditions: you received the goods/services, paid the RCM tax in cash, it's for business use, and not on the blocked credit list.
RCM in Your Returns
| Where | What to do |
|---|---|
| GSTR-1 | No entry (RCM is buyer's liability) |
| GSTR-3B Table 3.1(d) | Report inward supplies on RCM |
| GSTR-3B Table 4(A)(3) | Claim ITC of RCM tax paid |
| Books | Maintain RCM register; preserve self-invoices and payment vouchers |
Mark a supplier or service ledger as "RCM applicable" once. iAccounting handles self-invoice, payment voucher, RCM liability tracking, GSTR-3B Tables 3.1(d) and 4(A)(3) auto-populated, and 30-day time-of-supply reminders.
See RCM automation →Continue Learning
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