GST resources
Reverse Charge (RCM), Explained
Normally the seller charges GST and pays it to the government. Under reverse charge the buyer pays it instead. Most shops meet it on freight, legal fees and rent, and getting it wrong means a notice later.
What reverse charge is
GST is usually collected by the supplier: you buy, the supplier adds GST to the bill, and the supplier pays it to the government. That is called forward charge. Under reverse charge (RCM) the law makes the recipient liable instead. The supplier's bill carries no GST, and you work out the tax and pay it yourself.
There are two sources. Section 9(3) of the CGST Act and its notifications list specific goods and services where the recipient always pays. Section 9(4) covers notified purchases from unregistered suppliers, and today it is limited to specified real-estate cases, so ordinary purchases from an unregistered supplier do not attract RCM.
Cases small businesses meet most
| Service or goods | Supplier | Who pays under RCM |
|---|---|---|
| Road transport of goods by a goods transport agency (GTA) that has not opted to charge GST itself | GTA | Registered business, factory or company receiving the service |
| Legal services by an advocate or firm of advocates | Advocate | Business entity |
| Security services (supply of security personnel) | Supplier other than a body corporate | Registered person, with some exclusions |
| Renting of commercial property | Unregistered person | Registered person (composition taxpayers excluded) |
| Renting of a residential dwelling | Any person | Registered person |
| Services of a director | Director | Company |
| Services of an insurance agent or recovery agent | Agent | Insurer, bank or NBFC |
| Cashew nuts (not shelled or peeled), tobacco leaves, bidi wrapper leaves, raw cotton | Agriculturist or as notified | Registered person |
Selected entries from Notification Nos. 4/2017 and 13/2017-Central Tax (Rate) as amended. The list changes; check the current notification for your case.
Worked example: rent for the shop
Sri Lakshmi Stores, a registered kirana in Mysuru, pays ₹20,000 a month as rent for its shop to an owner who is not registered for GST. Renting of commercial property by an unregistered person to a registered person is under reverse charge, so the store must pay GST on the rent itself.
At 18%, the tax is ₹3,600 a month: CGST ₹1,800 and SGST ₹1,800. The store pays this in cash through its electronic cash ledger with GSTR-3B. In the same return it can claim the ₹3,600 as input tax credit, because the shop is used for its taxable business. The net cost is nil, but only if both steps are done; skipping the payment and claiming nothing still leaves interest and penalty exposure.
How to comply
- Issue a self-invoice for RCM supplies received from unregistered suppliers, and a payment voucher when you pay
- Pay RCM tax in cash; it cannot be set off with existing input credit
- Report it in GSTR-3B table 3.1(d), and claim the credit in table 4A(3) where eligible
- The time of supply is generally the earlier of payment and 60 days from the supplier's invoice
- If you are below the registration threshold but make purchases liable to reverse charge, registration becomes compulsory
Common mistakes
- Paying a GTA's freight bill without checking whether the GTA charged GST or left it to you
- Using input credit to pay RCM tax
- Forgetting RCM on rent when the owner is unregistered
- Claiming credit for RCM tax before paying it
- Treating every purchase from an unregistered seller as RCM
How it shows up on invoices and returns
A supplier's invoice under reverse charge states that tax is payable on reverse charge and shows no GST collected. As a supplier, if you sell something covered by RCM, your invoice must say so. In returns, RCM purchases appear in GSTR-3B 3.1(d) as tax payable and in 4A(3) as credit, and inward RCM supplies from registered suppliers also appear in your GSTR-2B.
How TripleBill helps
Record reverse-charge purchases in TripleBill as supplier bills or expenses with the GST amount you owe; they post to the books and the GSTR-3B summary shows the figures for the month. You pay the tax and file on gst.gov.in.
This page is general information about GST in India, not tax advice. Rates, thresholds and rules change; confirm with the GST portal or a chartered accountant before acting.
Last reviewed and sources
Last reviewed: November 2026. Facts on this page were checked against:
- CGST Act, 2017, sections 9(3), 9(4), 12(3), 13(3) and 31(3)(f)
- Notification No. 13/2017-Central Tax (Rate) as amended, including the entries for commercial property rent (2024) and the exclusion of composition taxpayers (Notification No. 7/2025-Central Tax (Rate))
- Notification No. 4/2017-Central Tax (Rate) (goods under RCM)
- CGST Act, 2017, section 49(4) (RCM tax paid in cash)
Frequently asked questions
Do I pay RCM on everything I buy from an unregistered dealer?
No. RCM applies only to the goods and services notified under section 9(3), and to the limited section 9(4) cases. Ordinary stock bought from an unregistered dealer is not under RCM.
Can I use input credit to pay reverse charge tax?
No. Tax under reverse charge must be paid in cash through the electronic cash ledger. You can then claim it as credit if the purchase is for your business.
Is RCM a real cost?
Usually not, when the credit is eligible: you pay the tax and claim it back in the same return. It is a cash-flow and compliance step, which is why it is easy to forget.
My transporter charges GST on the bill. Do I still pay RCM?
No. A GTA that opts to pay tax itself under forward charge charges GST on its invoice; then you pay the transporter and claim the credit normally.
Does a composition dealer pay RCM?
Yes, where the purchase is covered by RCM, at the normal rate, and without input credit. Composition taxpayers are excluded from the RCM entry on commercial rent from unregistered owners.
Is my shop rent under RCM if the owner is registered?
No. A registered owner charges GST on the rent invoice under forward charge, and you claim the credit.
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