Last updated: 17 April 2026. Under the Reverse Charge Mechanism (RCM), the buyer pays GST directly to the government instead of the seller. This applies to specific notified goods and services under Section 9(3) of the CGST Act, and to certain purchases from unregistered suppliers under Section 9(4). If you hire a lawyer, use a GTA for freight, pay director fees, or engage security staff, you are probably paying GST under RCM already, whether you realise it or not.
Applicability Note: This guide is based on RCM provisions under Sections 9(3) and 9(4) of the CGST Act, Notification No. 13/2017-Central Tax (Rate) for services and Notification No. 4/2017-Central Tax (Rate) for goods, as amended through April 2026. The list of notified goods and services under RCM changes periodically. Always verify the current list on cbic-gst.gov.in or with a GST professional before acting.
Who should care?
- Any GST-registered business that hires lawyers, freight transporters, directors, or security agencies
- Businesses purchasing goods or services from unregistered suppliers in notified categories
- E-commerce operators and aggregators (specific RCM obligations apply)
- Companies paying director sitting fees or professional fees to individual directors
1. What Is the Reverse Charge Mechanism?
Normally, the supplier of goods or services charges GST and remits it to the government. Under RCM, this responsibility reverses — the recipient (buyer) is liable to pay GST directly to the government.
RCM exists for two main reasons:
- Compliance coverage: Many suppliers in notified categories (lawyers, transporters, unregistered dealers) are small or exempt from registration. RCM ensures tax is collected by shifting the burden to the larger, registered recipient.
- Revenue protection: For high-value services like legal and transport services, RCM prevents revenue leakage when the supplier is difficult to track.
There are two types of RCM under GST:
| Type | Section | When It Applies |
|---|---|---|
| Notified goods/services | Section 9(3) | Specific goods and services notified by the government — RCM applies regardless of whether the supplier is registered |
| Unregistered supplier | Section 9(4) | Purchases from unregistered suppliers in specific notified categories only (not all purchases) |
2. Services Under RCM — Section 9(3) Notified List
The following services attract GST under reverse charge as per Notification No. 13/2017-Central Tax (Rate) and its amendments (last amended January 2025):
| Service | Supplier | Recipient (Who Pays GST) |
|---|---|---|
| Legal services | Individual advocate or firm of advocates | Any business entity |
| GTA services (Goods Transport Agency) | GTA who has not opted to pay tax @ 12% | Factory, society, registered person, body corporate |
| Director services | Director of a company (not being an employee of the company) | The company or body corporate |
| Insurance agent services | Insurance agent | Insurance company |
| Recovery agent services | Recovery agent | Banking company, financial institution, NBFC |
| Security services | Individual, HUF, partnership firm (not body corporate) | Registered person receiving security services |
| Renting of motor vehicle | Non-body corporate supplier (at 5% without ITC) | Body corporate receiving the service |
| Author/music composer services | Author, music composer, photographer, artist | Publisher, music company, producer |
| Import of services | Any person located outside India | Any person located in India (importer of service) |
Note: Sponsorship services were removed from the RCM list effective April 2025. If you were paying GST under RCM on sponsorship, check whether your current arrangements are still covered.
3. Goods Under RCM — Section 9(3) Notified List
As per Notification No. 4/2017-Central Tax (Rate), the following goods attract RCM:
- Cashew nuts (not shelled or peeled) — supplied by agriculturist
- Bidi wrapper leaves (tendu) — supplied by agriculturist
- Tobacco leaves — supplied by agriculturist
- Silk yarn — supplied by any person who manufactures silk yarn from raw silk or cocoons
- Raw cotton — supplied by agriculturist
- Used vehicles, seized goods, old gold/jewellery — supplied by the Central/State Government
- Lottery — supplied by State Government, Union Territory, or local authority
4. Section 9(4) — Purchases from Unregistered Suppliers
Section 9(4) was initially designed to apply RCM to all purchases from unregistered dealers. However, this was found to be unworkable and was suspended until it was limited to specific notified categories.
As of April 2026, Section 9(4) RCM applies only when:
- The recipient is a registered person
- The supply falls under a category specifically notified by the government
- The supplier is not registered under GST
For most routine purchases from small unregistered vendors (stationery, office supplies, etc.), Section 9(4) RCM is not triggered. Only the notified categories require RCM compliance.
5. Self-Invoicing Under RCM — The 30-Day Rule
When you pay GST under RCM for supplies from an unregistered person, you must issue a self-invoice (also called a recipient-issued invoice) because the unregistered supplier cannot issue a tax invoice.
From 01 November 2024, under Rule 47A of the CGST Rules, this self-invoice must be issued within 30 days of receiving the goods or services. Missing this deadline can create complications for ITC claims.
The self-invoice must include:
- Your GSTIN (as recipient)
- Supplier's name and address
- Description of goods/services, HSN/SAC code
- Taxable value and GST amount
- A note that tax is payable under reverse charge
6. How to Pay and Claim ITC on RCM
Payment
GST under RCM must be paid in cash — you cannot use your Input Tax Credit balance to pay RCM liability. Pay through the electronic cash ledger by depositing the amount via challan before filing your GSTR-3B.
Claiming ITC
Once you have paid the RCM tax in cash, you can claim full ITC of the same amount in the same GSTR-3B return (Table 4A). This makes RCM largely cash-flow neutral — you pay in cash and immediately get it back as ITC. However:
- ITC is available only if the goods/services are used for business purposes
- The general conditions of Section 16 apply — including the time limit for claiming ITC
- Blocked credits under Section 17(5) cannot be claimed even if paid under RCM
7. RCM Reporting in GST Returns
| Return | Where to Report | What to Report |
|---|---|---|
| GSTR-3B | Table 3.1(d) | Inward supplies liable to reverse charge — show the tax amount here |
| GSTR-3B | Table 4A | ITC on RCM — claim the credit after paying in cash |
| GSTR-1 | Not applicable | RCM supplies are not reported in the supplier's GSTR-1 (recipient reports them) |
Key takeaways
- Under RCM, the buyer pays GST instead of the seller — this applies to notified goods/services under Section 9(3) and specific purchases from unregistered suppliers under Section 9(4)
- Common RCM triggers: hiring lawyers, using GTAs for freight, paying director fees, engaging security agencies, and importing services
- RCM tax must be paid in cash — you cannot use ITC to discharge the liability
- After paying in cash, you can claim full ITC of the RCM amount in the same return
- Self-invoices for unregistered supplier purchases must be issued within 30 days under Rule 47A (effective November 2024)
- Sponsorship services were removed from the RCM list effective April 2025
Frequently asked questions
Do I need to pay RCM on all purchases from unregistered dealers?
No. Section 9(4) RCM applies only to specific notified categories, not all purchases from unregistered dealers. Routine purchases like stationery or office supplies from small unregistered vendors do not trigger RCM in most cases.
Can I use my ITC balance to pay GST under reverse charge?
No. RCM liability must always be paid in cash through the electronic cash ledger. You cannot offset RCM tax against your ITC balance. However, after paying in cash, you can claim ITC of the same amount in the same GSTR-3B.
Is RCM applicable on GTA services if the transporter is registered?
It depends. If the GTA has opted to pay tax at 12% (with ITC), the GTA pays GST under forward charge. If the GTA has not opted for this and charges at 5% (without ITC), the recipient pays under RCM. Check the GTA's invoice to determine which option applies.
What is the time limit for issuing a self-invoice under RCM?
Under Rule 47A of the CGST Rules (effective 01 November 2024), the self-invoice must be issued within 30 days of receiving the goods or services from an unregistered supplier.
How do I report RCM in my GSTR-3B?
Report the RCM liability in Table 3.1(d) of GSTR-3B as "Inward supplies liable to reverse charge." After paying this in cash, claim the ITC in Table 4A. Both entries should appear in the same return period.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. GST rules are subject to frequent changes through notifications and circulars. Please consult a qualified tax professional or verify the current provisions on the official GST portal (gst.gov.in) before making any compliance decisions.
Confused about which of your expenses attract RCM? Our GST experts can audit your purchases and set up compliant RCM processes → gstconsultancy.com