What is Reverse Charge Mechanism (RCM)?
Last updated: 27 June 2026
Reverse Charge Mechanism (RCM) is a GST provision under which the liability to pay tax shifts from the supplier to the registered recipient of goods or services, requiring the buyer — not the seller — to deposit the GST directly with the government.
Under normal GST, the supplier collects tax from the buyer and remits it. Under RCM, the supplier charges nothing on the invoice; instead, the recipient pays GST to the government and may then claim it back as ITC (subject to conditions).
When does RCM apply?
RCM applies in two situations:
Notified supplies (Section 9(3)): Specific categories notified by the government. Common examples include services from a Goods Transport Agency (GTA) for road transport, legal services from an advocate to a business, and services by a director to the company.
Unregistered supplier (Section 9(4)): This is now narrow. RCM on purchases from unregistered suppliers applies only to notified classes of registered persons and specified supplies (for example, promoters in the real-estate sector on certain inputs) — it is no longer a blanket rule on every purchase from an unregistered seller. Check whether a notification covers your specific case.
Fact box. A business liable under RCM must be registered for GST regardless of its own turnover — the registration threshold does not exempt RCM liability. RCM tax must be paid in cash and cannot be offset using ITC from the credit ledger.
ITC on RCM payments
The GST paid under RCM can generally be claimed back as ITC in the same month, provided the recipient is otherwise eligible and the supply is for a business purpose. The credit appears in GSTR-2B under a dedicated RCM section.
Frequently asked questions
Does RCM apply to composition scheme dealers? No. Composition dealers cannot claim ITC and their output is taxed at a flat rate. If they receive supplies attracting RCM, they must pay the RCM tax in cash but cannot claim it back — making unregistered purchases costlier for them.
How is RCM reported in GST returns? The recipient declares RCM liability in GSTR-3B (Table 3.1(d)) and the corresponding ITC claim (if eligible) in Table 4.
Sources: CBIC — cbic.gov.in; GSTN — gstn.org.in
General information, not professional advice. Verify on the official portal for your case. Reviewed by a Chartered Accountant; last updated 27 June 2026.
Related: Input Tax Credit (ITC) · GSTR-3B · Composition Scheme