Reverse Charge Mechanism (RCM) in GST

Last Updated: May 2026

Under the Reverse Charge Mechanism (RCM), the responsibility to pay GST shifts from the supplier to the recipient of goods or services.

What is Reverse Charge?

Normally, the seller collects and pays GST. Under RCM, the buyer pays GST directly to the government.

When RCM Applies

• Purchasing from unregistered supplier
• Specified services (legal, transport, etc.)
• E-commerce operators

Example

A business hires a lawyer:

• Lawyer does not charge GST
• Business pays GST under RCM

RCM Calculation

Service value = ₹10,000
GST (18%) = ₹1,800

Buyer pays ₹1,800 to government.

Input Tax Credit under RCM

The buyer can claim ITC after paying GST.

Compliance Requirements

• Self-invoice required
• Maintain proper records
• File GST returns

Common Mistakes

• Ignoring RCM transactions
• Not paying GST on time
• Incorrect reporting

FAQs

Who pays GST in RCM?

The buyer (recipient).

Can ITC be claimed?

Yes, after payment.

Is RCM applicable to all transactions?

No, only specified cases.

Conclusion

RCM is an important GST concept that shifts tax liability. Understanding it helps avoid penalties and ensures compliance.