Reverse charge under GST (RCM)

When the recipient, not the supplier, pays the GST, and the cash-flow and self-invoice rules

Reverse charge (RCM) flips the normal rule: instead of the supplier charging and paying GST, the recipient pays it directly to the government. It applies to a defined list of supplies under Section 9(3), the main ones a small business meets being legal services from an advocate, goods transport by a GTA that has not opted to charge forward, sponsorship (from a non-body-corporate), director services, security services from a non-corporate supplier, and the import of any service. The catch is cash flow: RCM tax must be paid in cash (you cannot offset it with input credit at that point), and only then can you claim the credit. The broad reverse charge on all purchases from unregistered suppliers (Section 9(4)) is largely suspended and now narrow.

Last reviewed: 29 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

What RCM is, and the supplies it covers

Under Section 9(3) the government notifies categories where the recipient pays the GST on reverse charge. The ones a typical SME encounters are: legal services from an individual advocate or firm of advocates to a business (18%); goods transport by a Goods Transport Agency that has not opted to pay forward (the recipient pays, typically 5%); sponsorship (now reverse charge only where the supplier is not a body corporate, after the 16 January 2025 change, a body-corporate sponsor charges forward); director services in a non-employee capacity (sitting fees, commission); security services from a non-corporate supplier; and the import of any service from outside India (IGST under reverse charge). Note the old 12% forward-charge option for a GTA was abolished under GST Reform 2.0, the structure is now 5% without credit or 18% with credit.

Buying from unregistered suppliers (Section 9(4))

Section 9(4) once made a registered business pay reverse charge on all purchases from unregistered suppliers, which caused chaos and was suspended. It is now narrow, applying mainly to notified classes such as real-estate promoters procuring specified inputs from unregistered suppliers, so a general SME does not pay reverse charge on ordinary purchases from unregistered vendors. Two points to remember: there is a small Rs 5,000-a-day aggregate exemption for unregistered-supplier purchases, and a composition dealer pays reverse charge on its inward supplies from unregistered persons. Because the section has been switched on and off for specific sectors, check the current position if you are a promoter or in a notified class.

warningThe broad reverse charge on all unregistered-supplier purchases is suspended, do not over-apply it. But composition dealers do pay RCM on unregistered-supplier inward supplies, and promoters have a live 9(4) obligation, so check your class.

Self-invoice, cash payment and the credit

Where RCM applies and the supplier is unregistered (or does not issue a GST invoice), the recipient must issue a self-invoice under Section 31(3)(f), clearly marked tax payable on reverse charge. The RCM tax is paid in cash through the GSTR-3B, you cannot offset it with existing input credit at the point of payment, which is a real cash-flow hit for a small business hiring a lawyer or transporter. Once paid, you can claim it as input credit (subject to the normal Section 16/17 conditions), so it is usually credit-neutral over time but cash-negative upfront. The time of supply is the earlier of payment or 60 days from the invoice for services (30 days for goods), so the liability cannot be deferred indefinitely.

tipRCM = you pay your supplier's GST, in cash, before you can use the credit. Budget for the cash-flow timing when you engage a lawyer, a goods transporter, or import a service.

Companion guides

Source / notes

CGST Act 2017 s.9(3) (reverse charge categories) + s.9(4) (unregistered-supplier RCM, largely suspended) + IGST Act s.5(3)/(4) (imports)
CGST Act 2017 s.31(3)(f) (self-invoice) + Rules 36/46; Notification 13/2017-CTR as amended (07/2025-CTR sponsorship; GTA Reform 2.0)
CGST Act 2017 ss.12/13 (time of supply under reverse charge)

Frequently asked questions

What is reverse charge under GST?+

It is when the recipient of a supply, not the supplier, pays the GST directly to the government. It applies to a notified list of supplies under Section 9(3), and to the import of services. You pay the tax in cash through your return and can then claim it as input credit, so it is a compliance and cash-flow obligation rather than a permanent extra cost.

Which of my purchases attract reverse charge?+

The common ones for a small business are legal services from an advocate, goods transport by a GTA that has not opted to charge forward, sponsorship (where the sponsor is not a body corporate), director services in a non-employee capacity, security services from a non-corporate supplier, and any service imported from outside India. Each makes you, the recipient, liable for the GST.

Do I pay reverse charge on purchases from unregistered suppliers?+

Generally no, for an ordinary business. The broad Section 9(4) reverse charge on all unregistered-supplier purchases was suspended and is now narrow (mainly real-estate promoters and notified classes). But a composition dealer does pay reverse charge on its unregistered-supplier inward supplies, and there is a small Rs 5,000-a-day exemption otherwise. Check your position if you are a promoter or in a notified class.

Can I use my input credit to pay reverse-charge tax?+

No, not at the point of payment. RCM tax must be paid in cash through your GSTR-3B, you cannot offset it with your existing input-credit balance. Once you have paid it, you can claim that amount as input credit (subject to the usual conditions), so it is recovered over time, but the upfront cash payment is the cash-flow catch for SMEs hiring lawyers, transporters or importing services.