Under the reverse charge mechanism (RCM), the person receiving a supply pays the GST to the government, instead of the supplier. It applies only to supplies the government has notified, such as a lawyer's fees, transport by a goods transport agency, a director's sitting fees, security guards from a non-company agency, and rent paid by a registered business to an unregistered landlord. You pay RCM tax in cash, report it in table 3.1(d) of GSTR-3B, and can usually claim the same amount back as input tax credit.
In a normal sale the seller collects GST and deposits it. Reverse charge flips that: the advocate's bill shows no GST, and your business works out the 18% and pays it itself. Many of these suppliers are individuals the tax system can't easily chase, so the liability sits with the registered business on the other side.
Where reverse charge comes from in the law
Four provisions do the work. Section 9(3) of the CGST Act lets the government notify specific goods and services on which the recipient pays the whole tax. That's where the lists in Notification 13/2017-CT(R) (services) and 4/2017-CT(R) (goods) come from. Section 9(4) covers notified classes of registered persons buying from unregistered suppliers; today it is used mainly for real estate promoters. Sections 5(3) and 5(4) of the IGST Act are the same two powers for inter-state supplies, which is why a reverse-charge bill from another state is paid as IGST.
Anyone liable to pay tax under reverse charge must register for GST whatever their turnover (section 24). And a composition dealer is not let off: it pays RCM at the normal rate, with no credit, except where an entry specifically excludes it.
Services under reverse charge (Notification 13/2017-CT(R))
These are the entries a small or medium business meets most often. The rate is the full GST; within your state it splits into CGST and SGST, and across states it is IGST.
| Entry | Service | Supplier | Who pays (recipient) | GST |
|---|---|---|---|---|
| 1 | Transport of goods by road by a GTA | Goods transport agency that has not opted to pay tax itself | Factory, society, co-operative, registered person, body corporate, partnership firm or casual taxable person who pays the freight | 5% |
| 2 | Legal services | Individual advocate, senior advocate or firm of advocates | Any business entity | 18% |
| 3 | Services of an arbitral tribunal | Arbitral tribunal | Any business entity | 18% |
| 4 | Sponsorship | Any person other than a body corporate (from 16 Jan 2025) | Body corporate or partnership firm | 18% |
| 5, 5A | Services of Central/State Government or a local authority, including renting of property to a registered person | Government or local authority | Business entity (5) / registered person (5A) | Rate of the service |
| 5AA | Renting of a residential dwelling | Any person | Any registered person | 18% |
| 5AB | Renting of any immovable property other than a residential dwelling | Unregistered person | Registered person, other than a composition dealer (from 16 Jan 2025) | 18% |
| 6 | Services as director | Director of a company or body corporate | That company or body corporate | 18% |
| 7 | Insurance agent services | Insurance agent | Insurance company | 18% |
| 8 | Recovery agent services | Recovery agent | Bank, financial institution or NBFC | 18% |
| 14 | Security services (supply of security personnel) | Any person other than a body corporate | Registered person, excluding composition dealers and government bodies registered only for TDS | 18% |
| 15 | Renting of a passenger motor vehicle with fuel included | Non-body-corporate that does not charge GST on its invoice at the rate specified in the entry | Body corporate | Rate of the service |
Source: Notification 13/2017-Central Tax (Rate), as amended up to Notification 8/2026-CT(R); entry 4 and 5AB as amended by 07/2025-CT(R) w.e.f. 16 January 2025; 5AA inserted by 05/2022-CT(R) w.e.f. 18 July 2022; 5AB inserted by 09/2024-CT(R) w.e.f. 10 October 2024. GTA rate: Notification 11/2017-CT(R) as amended by 15/2025-CT(R). Other entries (copyright transfers, business facilitators, DSAs, development rights to promoters and a few more) are in the notification.
The entries that need a second look
GTA. A goods transport agency can choose to charge GST itself (18% with credit from 22 September 2025, 12% before) by declaring it on the invoice. If it hasn't, and you fall in one of the listed recipient categories, you pay 5% under reverse charge. The person who pays the freight is treated as the recipient. Check every consignment note for the declaration before you decide who pays.
Advocates. The entry covers individual and firm advocates, not chartered accountants or company secretaries. Separately, legal services to a business whose turnover in the previous year was within the registration-exemption limit are exempt under the services exemption notification, so a very small business may owe nothing.
Directors. Sitting fees and commission paid to a director for services as a director fall here. Salary paid to a whole-time director as an employee, with TDS under section 192, is outside GST (CBIC Circular 140/10/2020).
Commercial rent from an unregistered landlord (5AB). This began on 10 October 2024. From 16 January 2025, Notification 07/2025 took composition dealers out of the recipient column, so only regular-scheme tenants pay it. Our page on GST on rent covers this with a full example.
House rented to a registered person (5AA). A registered proprietor who rents a flat in a personal capacity, to live in, remains exempt.
Goods under reverse charge (Notification 4/2017-CT(R))
The goods list is short. A registered buyer pays the GST on cashew nuts (not shelled or peeled), bidi wrapper (tendu) leaves, tobacco leaves and raw cotton bought from an agriculturist, and on silk yarn, specified mint oils and a few government sales. The newest entry is metal scrap of Chapters 72 to 81 bought from an unregistered person, since 10 October 2024 (Notification 06/2024-CT(R)). The rate is whatever the goods normally carry; reverse charge only changes who pays.
Time of supply: when the RCM tax becomes due
For services, the time of supply is the earlier of the date you pay the supplier and the date immediately after 60 days from the supplier's invoice. If the supplier is unregistered, it is the earlier of the payment date and the date of your self-invoice (section 13(3), as amended from 1 November 2024). For goods it is the earliest of the date you receive the goods, the date you pay, and the date immediately after 30 days from the supplier's invoice (section 12(3)). Whichever month that falls in is the GSTR-3B where the tax goes.
Self-invoice and payment voucher
When the supplier is registered (a GTA, a law firm with a GSTIN), it issues a normal tax invoice that says tax is payable on reverse charge, and you work from that. When the supplier is unregistered (an individual director, a small security agency, a landlord without a GSTIN), you have to raise the invoice on yourself. That is the self-invoice under section 31(3)(f), and Rule 47A gives you 30 days from receiving the supply to issue it. When you pay the supplier, you also issue a payment voucher under section 31(3)(g). The self-invoice matters for credit too: CBIC Circular 211/5/2024 says the time limit for claiming ITC on it runs from the financial year in which you issue it. The GST invoice format page lists what a tax invoice must carry.
Pay in cash, then claim the credit
This is the part that catches people. Tax payable under reverse charge can't be set off against the credit sitting in your electronic credit ledger. Section 49(4) lets credit pay only "output tax", and the definition of output tax excludes tax payable on reverse charge. So RCM goes out of the electronic cash ledger, even in a month when you have lakhs of credit.
Once paid, the same tax is normally available as input tax credit in the same GSTR-3B, as long as the service or goods are used for business and the credit isn't blocked under section 17(5). In GSTR-3B the liability goes in table 3.1(d), "Inward supplies (liable to reverse charge)", and the credit goes in table 4(A)(3), "Inward supplies liable to reverse charge (other than 1 & 2 above)". For a regular-scheme business the net effect is usually a cash-flow cost, not a real one. For a composition dealer there is no credit, so RCM is a true extra cost.
Example 1: freight from Gujarat and a lawyer's bill
Patil Agro Foods Pvt Ltd runs a processing unit in Chakan, registered in Maharashtra on the regular scheme. In August 2026 it gets two bills. The figures are made up for the example.
An Ahmedabad transporter that has not opted for forward charge moves raw material to Chakan, freight ₹40,000, paid by Patil Agro. For GTA services to a registered person, the place of supply is the recipient's location, Maharashtra. The supplier is in Gujarat, so this is inter-state and the 5% is IGST. A Pune advocate also bills ₹60,000 for a recovery suit, with no GST on the bill. That's intra-state, so 18% splits into CGST and SGST.
| Bill | Value | Rate | IGST | CGST | SGST |
|---|---|---|---|---|---|
| GTA freight (Ahmedabad) | ₹40,000 | 5% | ₹2,000 | – | – |
| Advocate fees (Pune) | ₹60,000 | 18% | – | ₹5,400 | ₹5,400 |
| Table 3.1(d) | ₹1,00,000 | ₹2,000 | ₹5,400 | ₹5,400 |
Patil Agro deposits ₹12,800 in cash with its August return. In the same return it claims ₹12,800 in table 4(A)(3): ₹2,000 IGST, ₹5,400 CGST and ₹5,400 SGST. If you want to see the split for any amount, the IGST calculator and CGST and SGST calculator do it instantly.
Example 2: security guards and a director's sitting fee
Deshmukh Auto Components Pvt Ltd in Bhosari takes guards from a proprietorship security agency that has no GSTIN, for ₹75,000 in October 2026. The same month it pays an independent director a sitting fee of ₹20,000 for a board meeting. Both are reverse-charge supplies at 18%, and both suppliers are unregistered, so the company raises self-invoices for each.
Now say its output GST on sales for October is ₹3,40,000 and it has ₹4,10,000 of credit in the ledger. The sales tax can come entirely out of that credit. The ₹17,100 can't: it has to be paid in cash. After paying, the company claims ₹17,100 as credit in table 4(A)(3), which adds to its ledger for later months. The tax costs nothing in the end, but the cash goes out first, and a missed RCM payment attracts interest. The usual misses are rent from an unregistered landlord, a director's sitting fee, and GTA bills nobody checked for the forward-charge declaration.
Frequently Asked Questions
What is the reverse charge mechanism in GST?
Can RCM be paid from input tax credit?
Where is RCM shown in GSTR-3B?
Do composition dealers pay GST under reverse charge?
What is the GST rate on GTA under reverse charge?
General information, not tax advice. Names and amounts in the examples are made up. Sources: CGST Act sections 9(3), 9(4), 12(3), 13(3), 24, 31(3)(f)-(g) and 49(4); IGST Act sections 5(3) and 5(4); CGST Rule 47A; Notifications 13/2017-CT(R) and 4/2017-CT(R) as amended; CBIC Circulars 140/10/2020-GST and 211/5/2024-GST.
Last reviewed 9 November 2026.