What Is Reverse Charge Mechanism (RCM) in GST? Meaning, List and How to Pay (2026)

Normally the seller collects GST from the buyer and pays it to the government. That is forward charge. Under the reverse charge mechanism (RCM), the liability is flipped: the buyer pays the GST directly to the government, and the seller's invoice carries no GST.

RCM applies in two situations:

1. Notified goods and services (section 9(3)): the government lists supplies where the recipient always pays, whoever the supplier is.
2. Purchases from unregistered suppliers (section 9(4)): only for notified categories, such as specified inputs bought by real-estate developers.

The full list is longer and changes by notification, so check the current notification for anything unusual before relying on this table.

1. Issue a self-invoice when you buy from an unregistered supplier, within 30 days of receiving the goods or services. Issue a payment voucher when you pay.
2. Work out the time of supply. For services, it is generally the earlier of the payment date and 60 days after the supplier's invoice.
3. Pay the tax in cash through your electronic cash ledger. RCM liability cannot be paid from input tax credit.
4. Report it in GSTR-3B as an inward supply liable to reverse charge.
5. Claim the credit in the same GSTR-3B, if the purchase is for business and the credit isn't blocked.

For most businesses the cash outflow comes back as credit the same month. The cost of getting it wrong is interest and penalties when an audit finds RCM that was never paid.

• Office rent to an individual landlord. Since October 2024, a registered tenant renting a commercial space from an unregistered landlord owes RCM on the rent. This is the most commonly missed item.
• Advocate's fees paid without RCM.
• Directors' sitting fees or commission, booked without RCM.
• Freight paid to transporters without checking whether the GTA charged GST.

TaxQue's GST return filing team reviews your expense ledger for RCM items every month. If a notice has already arrived, see GST notice resolution.