A GST mechanism where the recipient of goods or services is liable to pay tax instead of the supplier, commonly applied to imports and specified goods/services.
Under normal GST, the supplier charges and remits tax. Under RCM, this liability shifts to the recipient. RCM applies in two cases: 1) Section 9(3) — specific goods/services notified by the government (e.g., legal services by advocates, transport by GTA, renting from unregistered persons), and 2) Section 9(4) — purchases from unregistered dealers (currently limited to specific categories). The recipient must self-invoice, pay GST under RCM, and can claim ITC on it. RCM tax must be paid in cash — it cannot be offset against ITC.
A company receives legal services worth ₹1,00,000 from an advocate. Under RCM, the company (recipient) pays 18% GST = ₹18,000 to the government instead of the advocate. The company can claim ₹18,000 as ITC in the same month's GSTR-3B.
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Yes. GST paid under reverse charge can be claimed as Input Tax Credit. However, RCM tax must first be paid in cash through the electronic cash ledger — it cannot be adjusted against existing ITC. Once paid, it becomes available as ITC from the next month.
Key ones: legal services by advocates, transport by GTA (Goods Transport Agency), sponsorship services, services by directors to companies, renting of motor vehicles, security services by unregistered persons, and import of services. The government updates this list periodically via notifications.
A comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple earlier taxes like VAT, excise duty, and service tax.
The GST paid on business purchases that can be claimed as a credit against the GST collected on sales, reducing the net tax payable.
A periodic document filed with GST authorities declaring sales, purchases, tax collected, tax paid, and claiming input tax credit for a specified period.
A simplified GST scheme for small taxpayers with turnover up to ₹1.5 crore, allowing them to pay a flat percentage of turnover as tax instead of regular GST rates.
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