# GST Reverse Charge Mechanism Reference for Indian Businesses > Source: https://netray.co/tools/gst-reverse-charge-mechanism-reference-india > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer A searchable table of common reverse charge situations under GST, with the person liable, the legal basis and a practical note for each. ## Category regional ## Erp Any ERP ## Industry Manufacturing ## Region India ## Audience - Accounts payable - Tax manager - Finance controller ## Tool **Kind:** worksheet **Mode:** reference **Columns:** #### Supply or situation **Key:** case **Type:** text #### Goods or services **Key:** type **Type:** text #### Who pays tax under RCM **Key:** liable **Type:** text #### Legal basis **Key:** basis **Type:** text #### Practical note **Key:** note **Type:** text **Rows:** **Case:** Goods transport agency (GTA) services by road **Type:** Services **Liable:** Recipient, if a registered person or specified entity, in the notified cases **Basis:** Section 9(3) CGST Act, notification **Note:** Check whether the GTA has opted for forward charge before applying RCM. **Case:** Legal services by an advocate or firm of advocates **Type:** Services **Liable:** Business entity receiving the services **Basis:** Section 9(3) CGST Act, notification **Note:** Applies to legal fees booked in accounts payable. **Case:** Sponsorship services **Type:** Services **Liable:** Body corporate or partnership firm receiving the sponsorship **Basis:** Section 9(3) CGST Act, notification **Note:** Often missed in marketing spend. **Case:** Services by a director to the company **Type:** Services **Liable:** The company **Basis:** Section 9(3) CGST Act, notification **Note:** Applies to fees outside an employment contract; check current treatment of salary. **Case:** Import of services from a supplier outside India **Type:** Services **Liable:** Recipient in India **Basis:** Section 5(3) IGST Act **Note:** IGST is payable even if the recipient is registered; ITC is possible if used for business. **Case:** Security services by a non-body corporate supplier **Type:** Services **Liable:** Registered recipient in the notified cases **Basis:** Section 9(3) CGST Act, notification **Note:** Review contracts with individual or proprietary security providers. **Case:** Renting of a motor vehicle with a driver by a non-body corporate **Type:** Services **Liable:** Recipient in the notified cases **Basis:** Section 9(3) CGST Act, notification **Note:** Check the conditions on the supplier's tax rate and ITC option. **Case:** Services by an author, music composer or similar to a publisher or producer **Type:** Services **Liable:** Publisher or producer, in the notified cases **Basis:** Section 9(3) CGST Act, notification **Note:** Not usually relevant to manufacturers. **Case:** Recovery agent services to a bank or financial institution **Type:** Services **Liable:** The bank, financial institution or NBFC **Basis:** Section 9(3) CGST Act, notification **Note:** Relevant only for lenders. **Case:** Raw cotton supplied by an agriculturist **Type:** Goods **Liable:** Registered recipient such as a spinning mill **Basis:** Section 9(3) CGST Act, notification **Note:** Relevant to textile manufacturers. **Case:** Unprocessed tobacco leaves from an agriculturist **Type:** Goods **Liable:** Registered recipient **Basis:** Section 9(3) CGST Act, notification **Note:** Self invoice is needed because the supplier is unregistered. **Case:** Cashew nuts, not shelled or peeled **Type:** Goods **Liable:** Registered recipient **Basis:** Section 9(3) CGST Act, notification **Note:** Relevant to food processors. **Case:** Used vehicles purchased from unregistered persons by a dealer **Type:** Goods **Liable:** Registered dealer, in the notified case **Basis:** Section 9(3) CGST Act, notification **Note:** Specific to vehicle dealers. **Case:** Supplies by an unregistered supplier to a registered person in specified categories **Type:** Goods or services **Liable:** Registered recipient, only for the categories notified under Section 9(4) **Basis:** Section 9(4) CGST Act, notification **Note:** Earlier blanket treatment was narrowed, so confirm the current list. **Case:** Supplies on which RCM applies and invoice is not received from supplier **Type:** Both **Liable:** Recipient **Basis:** Section 31(3)(f) CGST Act **Note:** Recipient raises a self invoice for supplies from unregistered persons where applicable. **Case:** Payment to supplier under RCM **Type:** Both **Liable:** Recipient **Basis:** Section 31(3)(g) CGST Act **Note:** Payment voucher is issued at the time of payment. **Case:** Time of supply for goods under RCM **Type:** Goods **Liable:** Recipient **Basis:** Section 12(3) CGST Act **Note:** Earliest of receipt of goods, payment date, or 30 days after the supplier invoice date. **Case:** Time of supply for services under RCM **Type:** Services **Liable:** Recipient **Basis:** Section 13(3) CGST Act **Note:** Earlier of payment date or 60 days after the supplier invoice date. **Case:** Payment of RCM tax **Type:** Both **Liable:** Recipient **Basis:** Section 49 CGST Act **Note:** RCM tax must be paid in cash, it cannot be paid from the ITC balance. **Case:** ITC on RCM tax paid **Type:** Both **Liable:** Recipient **Basis:** Section 16 CGST Act **Note:** Credit is available only if the input is used for business and not blocked under Section 17(5). **Notes:** Reference only. The list of notified services and goods, and the conditions attached to each, are amended by notification. Verify against the current notifications and with your tax adviser before booking. ## Content **Intro:** Under the reverse charge mechanism (RCM), the buyer, not the seller, pays GST to the government. This reference lists the cases accounts payable teams meet most often, the legal basis, and the practical points to watch while booking and paying. **Sections:** #### How to use this reference **Body:** Search by the kind of supply, such as freight, legal fees or import of services, and read across to see who pays, which section applies and what to check. Use it as a screening aid during vendor invoice processing. It does not replace the notification text, because RCM entries carry conditions such as the status of the supplier or recipient. Export the table to Excel to attach to a vendor master review or to a procedure note. #### How RCM works in the books **Body:** The recipient first confirms that the supply is covered. It then raises a self invoice if the supplier is unregistered, pays the tax in cash through the electronic cash ledger, reports it in GSTR-3B, and claims input tax credit where it is eligible. Time of supply rules decide in which month the liability arises, so a delay in paying a vendor can still trigger liability on the 30th day for goods or the 60th day for services from the invoice date. **Bullets:** - Identify covered supplies at invoice entry - Raise self invoice and payment voucher where needed - Pay RCM tax in cash, not from ITC - Report in GSTR-3B and claim eligible ITC #### Common mistakes **Body:** The commonest error is treating RCM as a purchase-ledger entry only, so the liability never reaches GSTR-3B. Others apply RCM to a transport agency that has chosen forward charge, or forget it on import of services such as software subscriptions and overseas consulting. A third group tries to pay RCM from the ITC balance. Run a monthly review of vendor categories that are RCM-prone and compare the RCM liability in your ledgers with the amount reported in the return. #### ERP notes **Body:** Set RCM flags at the vendor and item or service category level, not only at invoice entry. In SAP, Oracle, Dynamics and Indian ERPs, this normally means a tax code or tax rule that posts a liability account and an ITC account together. Build a report that lists RCM postings by month and ties them to the GSTR-3B figure. **Cta:** If RCM postings in your ERP do not tie to GSTR-3B, Netray can help build a reconciliation query over your tax tables without changing the posting logic. **Faq:** #### What is reverse charge under GST? **Answer:** It is a mechanism where the recipient of a supply pays the GST directly to the government instead of the supplier. It applies to notified goods and services, to supplies from unregistered persons in specified categories, and to import of services. The liability is reported in GSTR-3B. #### Can I pay RCM tax from input tax credit? **Answer:** No. RCM tax must be deposited in cash through the electronic cash ledger. After payment, the credit can be claimed in the same return period if the input is used for business and is not blocked. #### Do I need a self invoice for RCM? **Answer:** Yes, where the supplier is unregistered and RCM applies, the recipient issues an invoice for the supply at the time of receipt, and a payment voucher at the time of making payment. Where the supplier is registered and sends an invoice, that invoice is used. #### Is RCM applicable on import of services? **Answer:** Yes. Import of services is taxed under Section 5(3) of the IGST Act on a reverse charge basis. The Indian recipient pays IGST and can take input credit if the service is used for business. ## Search terms reverse charge mechanism list, gst rcm reference, rcm on goods transport agency, rcm on import of services, rcm on legal services, gst reverse charge items, rcm self invoice, rcm time of supply --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json