Under the Reverse Charge Mechanism (RCM), the responsibility of paying GST shifts from the supplier to the recipient. Instead of the supplier collecting and depositing GST, the recipient becomes liable to pay the tax directly to the Government.<\/p>\n
RCM applies only to specified supplies notified under GST. For businesses, identifying RCM transactions correctly is important because an overlooked liability can result in interest and compliance issues.<\/p>\n
What is RCM under GST?<\/p>\n
In simple terms:<\/p>\n
Supplier provides goods\/services \u2192 Recipient pays GST to the Government.<\/p>\n
RCM mainly applies to certain notified goods and services under Section 9(3) and specific cases under Section 9(4) and Section 9(5) of the CGST Act.<\/p>\n
Once the recipient pays the RCM liability, eligible Input Tax Credit (ITC) can generally be claimed, subject to the applicable conditions.<\/p>\n
Important Services Covered under RCM
\n
Service\tRecipient Liable\tGST Rate
\n
GTA services to specified recipients\tRecipient\t5%
\n
Legal services by advocate\/law firm to business entity\tBusiness entity\t18%
\n
Director services to company\/body corporate\tCompany\t18%
\n
Insurance agent services\tInsurance company\t18%
\n
Recovery agent services\tBank\/NBFC\t18%
\n
Specified security services\tRegistered recipient\t18%
\n
Specified Government\/local authority services\tBusiness entity\tGenerally 18%
\n
Renting of specified immovable property\tRegistered recipient\t18%
\n
Import of services\tIndian recipient\tApplicable IGST rate
\n
Specified copyright services\tRecipient\tApplicable notified rate
\n
Some Common Examples<\/p>\n
GTA services: Transportation services provided by a Goods Transport Agency to specified recipients can attract RCM, generally at 5% where the GTA has not opted for forward charge.<\/p>\n
Legal services: Legal services supplied by an advocate or law firm to a business entity are generally taxable under RCM at 18%.<\/p>\n
Director services: Services provided by a director to a company in the capacity of a director are generally covered under RCM at 18%.<\/p>\n
Rent: Certain notified rental transactions can result in RCM liability on the registered recipient.<\/p>\n
Goods Covered under RCM<\/p>\n
Some important notified goods include:<\/p>\n
Goods\tGST Rate
\n
Cashew nuts supplied by agriculturist\t5%
\n
Raw cotton supplied by agriculturist\t5%
\n
Tobacco leaves supplied by agriculturist\t5%
\n
Tendu leaves\t18%
\n
Specified metal scrap\t18%
\n
Certain essential\/mentha oils\t18%<\/p>\n
The exact applicability depends on the HSN, supplier and recipient conditions prescribed under the relevant notifications.<\/p>\n
Metal Scrap RCM \u2014 Important for 2026<\/p>\n
Metal scrap is an important area of RCM compliance. Specified metal scrap supplied by an unregistered person to a registered person is covered under RCM, subject to the applicable conditions.<\/p>\n
Businesses dealing in scrap should therefore review their purchase records carefully and ensure that the correct RCM liability is accounted for.<\/p>\n
Important 2026 Update \u2014 Sponsorship<\/p>\n
A commonly seen error in older RCM articles relates to sponsorship services.<\/p>\n
From 16 January 2025, sponsorship supplied by a body corporate was moved to forward charge. The RCM entry continues for sponsorship supplied by a person other than a body corporate to a body corporate or partnership firm, subject to the prescribed conditions.<\/p>\n
This is why businesses should avoid relying on outdated RCM lists.<\/p>\n
How to Comply with RCM<\/p>\n
A practical RCM process can be followed:<\/p>\n
Identify RCM transaction \u2192 Calculate GST \u2192 Pay through electronic cash ledger \u2192 Report in GST return \u2192 Claim eligible ITC<\/p>\n
Businesses should also maintain a separate RCM ledger or tracker so that transactions such as legal fees, freight, rent, director services and scrap purchases are not missed.<\/p>\n
RCM vs Forward Charge
\n
Particular\tForward Charge\tReverse Charge
\n
GST paid by\tSupplier\tRecipient
\n
GST collected from customer\tGenerally yes\tGenerally no
\n
Tax deposited by\tSupplier\tRecipient
\n
ITC\tSubject to normal conditions\tSubject to applicable conditions
\n
Conclusion<\/p>\n
RCM is an important part of GST compliance and can directly affect a business’s tax liability, cash flow and ITC.<\/p>\n
The main challenge is that RCM transactions are spread across different types of expenses, including freight, legal services, rent, director services, security services and specified goods such as metal scrap.<\/p>\n
For 2026, businesses should regularly review their expense ledgers, invoices and purchase records and maintain a proper RCM tracker. Staying updated with amendments is equally important, as relying on an old RCM list can lead to incorrect GST reporting.<\/p>\n","protected":false},"excerpt":{"rendered":"
Under the Reverse Charge Mechanism (RCM), the responsibility of paying GST shifts from the supplier to the recipient. Instead of the supplier collecting and depositing GST, the recipient becomes liable to pay the tax directly to the Government. RCM applies only to specified supplies notified under GST. For businesses, identifying RCM transactions correctly is important…<\/p>\n","protected":false},"author":18,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[6],"tags":[155,157,154,152,156,153,150,151],"class_list":["post-710","post","type-post","status-publish","format-standard","hentry","category-compliances","tag-gst-rcm-list","tag-gst-reverse-charge","tag-rcm-goods-2026","tag-rcm-gst","tag-rcm-rates-2026","tag-rcm-services-2026","tag-rcm-under-gst-2026","tag-reverse-charge-mechanism"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/710","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=710"}],"version-history":[{"count":1,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/710\/revisions"}],"predecessor-version":[{"id":1208,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/710\/revisions\/1208"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}