Reverse charge mechanism (RCM) under GST, explained.

What is reverse charge?

Under normal GST, the supplier charges GST on the invoice, collects it from you, and deposits it with the government. Reverse charge mechanism (RCM) reverses that flow: for specific notified goods, services and situations, the recipient — not the supplier — is liable to pay GST directly to the government.

RCM exists mainly to plug collection gaps: where the supplier is unregistered, hard to track, or based outside India, the law shifts the compliance burden to the (usually larger, registered) buyer instead. It doesn't change how much tax is owed — only who's responsible for paying it.

When does RCM apply?

RCM applies in three broad situations: specific goods and services notified by the government, purchases from certain unregistered suppliers, and a few categories routed through e-commerce operators. The list below covers the common ones — it is not exhaustive, and notifications are amended from time to time, so check the latest on the GST portal or with your CA before relying on it for a specific transaction.

Our GST guide has the fuller registration and returns picture if you're new to GST compliance end to end.

Who pays, and how

Under RCM, the recipient pays GST in cash — you cannot settle an RCM liability by adjusting it against your available Input Tax Credit balance. It has to be paid through the electronic cash ledger, reported in your GSTR-3B, and only then does it become eligible to be claimed back as credit (subject to the usual ITC conditions).

This "pay first, claim later" structure is the part businesses most often trip up on — RCM liability and RCM ITC are reported in different sections of GSTR-3B, and mixing them up (or netting them off) is a common notice trigger.

ITC on RCM paid

If the underlying purchase is for business use, GST paid under reverse charge is generally available as Input Tax Credit — same as GST paid to a regular supplier. The difference is visibility: RCM tax doesn't flow into your GSTR-2B automatically the way vendor-filed invoices do, since there's no vendor return generating it. You need to track RCM liability and the matching ITC yourself, invoice by invoice, and report both correctly in GSTR-3B.

See our input tax credit guide for how ITC eligibility, blocked credits and reconciliation work more broadly.

Self-invoice and accounting treatment

When you buy from an unregistered supplier (or otherwise receive a supply that isn't backed by a proper GST tax invoice) under RCM, you — the recipient — are required to raise a self-invoice, along with a payment voucher when the GST is actually paid. These documents are your evidence trail for the RCM liability and the later ITC claim, so keep them with your purchase records.

On the books, an RCM transaction touches three things: the expense or purchase itself, an RCM output liability (payable in cash), and — once paid — an RCM input credit. Missing any one of the three is how RCM entries go wrong at return time.

TatvaBooks captures RCM at the point of voucher entry — mark a purchase or expense as reverse-charge and the RCM liability and eligible ITC are worked out and tracked alongside the entry, instead of being reconstructed later from memory at GSTR-3B time. See it in the context of the rest of your GST workflow on the GST billing software page.

Frequently asked questions