Reverse Charge Mechanism (RCM) under GST
Under reverse charge, the buyer (not the seller) pays GST to the government. Here is exactly when it applies, the services it covers, and the self-invoice you must issue.
Updated 2026-05-30 · A reference guide from Ledgester
Key facts
- RCM shifts the liability to pay GST from the supplier to the recipient of the supply.
- It applies to notified goods and services under Section 9(3), and to specified supplies from unregistered persons under Section 9(4).
- For unregistered purchases, the recipient must issue a self-invoice within 30 days (Rule 47A, effective 1 November 2024).
- RCM tax is paid in cash; it can then be claimed as ITC if the supply is used for business and is not blocked under Section 17(5).
What is the reverse charge mechanism?
In a normal GST transaction, the supplier collects GST from the buyer and pays it to the government. Under the reverse charge mechanism (RCM), that responsibility flips: the recipient of the goods or services pays the GST directly to the government.
RCM is governed by Section 9(3) and Section 9(4) of the CGST Act (and the mirror provisions, Section 5(3) and 5(4), of the IGST Act for inter-state supplies). It exists so the government can collect tax on supplies from sectors that are hard to track or from unregistered suppliers.
When does RCM apply?
There are two distinct triggers:
- Section 9(3), notified goods and services. The government has published specific categories that always attract reverse charge, regardless of who the supplier is. Examples include Goods Transport Agency (GTA) services, legal services from an advocate, and director services.
- Section 9(4), supplies from unregistered persons. RCM applies when a registered person receives notified supplies from an unregistered supplier. This is not a blanket charge on all unregistered purchases; it applies only to notified categories (for example, certain inputs for real-estate promoters).
Common services that attract RCM
| Service | Recipient who pays under RCM |
|---|---|
| Goods Transport Agency (GTA) | The business paying the freight |
| Legal services from an advocate / firm of advocates | The business entity receiving the service |
| Sponsorship services | The body corporate / partnership firm sponsor |
| Services supplied by a director to the company | The company |
| Security services (manpower supply) | The registered recipient |
| Renting of a motor vehicle to a body corporate | The body corporate |
| Import of services | The recipient in India |
This is an illustrative list, not exhaustive. Always confirm the latest CBIC notification for your specific supply.
Self-invoicing and the 30-day rule (Rule 47A)
When you buy under RCM from an unregistered supplier, that supplier cannot issue a GST invoice, so you, the recipient, must create the documentation yourself:
- Self-invoice: issued on the supply, recording the value and the GST payable under reverse charge.
- Payment voucher: issued when you pay the supplier.
Rule 47A of the CGST Rules, inserted by Notification No. 20/2024–Central Tax and effective 1 November 2024, sets a hard deadline: the self-invoice must be issued within 30 days of receiving the supply. Missing this window can attract interest at 18% per annum on the delayed tax.
Can you claim ITC on RCM tax?
Yes. The GST you pay under reverse charge must be paid in cash (it cannot be set off against existing input credit). Once paid, you can claim it back as Input Tax Credit in the same or a later tax period, provided the supply is used for business and is not on the blocked-credit list under Section 17(5).
Frequently asked questions
- Who pays GST under the reverse charge mechanism?
- The recipient of the goods or services pays the GST directly to the government, instead of the supplier collecting and remitting it.
- What is the time limit to issue an RCM self-invoice?
- Rule 47A (Notification 20/2024, effective 1 November 2024) requires the recipient to issue the self-invoice within 30 days of receiving a supply from an unregistered person.
- Does RCM apply to all purchases from unregistered dealers?
- No. Under Section 9(4), reverse charge on unregistered purchases applies only to notified categories; it is not a blanket charge on every unregistered purchase.
- Can I claim input tax credit on GST paid under RCM?
- Yes, if the supply is used for business and is not blocked under Section 17(5). The RCM tax is paid in cash and then claimed as ITC in the same or a later period.
This guide is general information, not professional tax advice, and GST rules change through CBIC notifications. Verify the current position for your situation or consult a qualified professional before acting.