What is reverse charge in GST in simple words?

It is when the buyer pays GST to the government instead of the seller. It applies only to supplies the government has notified, and to some purchases from unregistered or foreign suppliers.

Can RCM tax be paid using input tax credit?

No. Tax under reverse charge must be paid in cash. After paying it, the buyer can usually claim the same amount as input tax credit.

Is GST payable under RCM on rent?

Yes in two cases: a registered person renting a residential dwelling for business, and a registered person (other than a composition taxpayer) renting commercial property from an unregistered owner.

Do legal fees attract reverse charge?

Yes. When an individual advocate or a firm of advocates provides legal services to a business entity, the business pays GST under reverse charge at 18%.

Reverse charge mechanism (RCM) under GST

Updated 11 October 2026

Under the reverse charge mechanism (RCM), the buyer of certain goods or services pays the GST directly to the government, instead of the seller collecting it. It applies to supplies notified by the government, such as an advocate's fees paid by a business, and in some cases to purchases from unregistered suppliers. The buyer can usually claim the tax back as input tax credit.

Forward charge vs reverse charge

Normally, GST works on forward charge: the seller adds GST to the bill, collects it and deposits it. Reverse charge flips this for specific cases, usually where the supplier is small, unorganised or outside India, and collecting tax from them would be difficult. The tax rate is the same. Only the person who pays it changes.

Common services under reverse charge

Service	Supplier	Who pays GST
Goods transport by road	Goods transport agency (GTA) that has not opted to pay tax itself	Factories, companies, firms, societies and registered persons who pay the freight
Legal services	An individual advocate or a firm of advocates	Any business entity
Director's services	A director	The company or body corporate
Sponsorship	Any person	A body corporate or partnership firm
Insurance agent and recovery agent services	The agent	The insurer, bank or NBFC
Security services (security personnel)	Anyone other than a body corporate	A registered business
Renting of a residential dwelling	Any owner	A registered person who rents it
Renting of commercial property	An unregistered owner	A registered person (composition taxpayers excluded since 16 January 2025)
Imported services	A supplier outside India	The recipient in India (as IGST)

Some goods are also under reverse charge, including raw cotton and unshelled cashew nuts supplied by agriculturists, tendu (bidi wrapper) leaves, tobacco leaves, and used vehicles, seized goods and scrap sold by the government.

The full list is in the government's rate notifications on cbic-gst.gov.in.

How the buyer pays

Registration: anyone liable to pay tax under reverse charge must register, whatever their turnover.
Cash only: RCM tax must be paid through the electronic cash ledger. It cannot be paid using input tax credit.
Claim it back: after paying, the buyer can claim the same amount as input tax credit, if the service is used for business and the credit is not blocked.
Self-invoice: when the supplier is unregistered, the buyer issues a self-invoice within 30 days of receiving the goods or services, and a payment voucher when paying the supplier.
Reporting: RCM purchases are reported in GSTR-3B (Table 3.1(d) for liability and Table 4 for credit).

When the tax becomes due

Goods: the earliest of the date you receive the goods, the date you pay, or the day after 30 days from the supplier's invoice.
Services: the earlier of the date you pay, or the day after 60 days from the supplier's invoice.

Missing these dates means interest at 18% a year on the late tax.

Worked example. A private company in Pune pays a Pune-based advocate ₹50,000 for legal advice. The advocate's bill shows ₹50,000 with no GST.

The company owes GST at 18% under reverse charge: CGST 9% = ₹4,500 and SGST 9% = ₹4,500, total ₹9,000.
It pays ₹9,000 in cash with its GSTR-3B for the month.
In the same return, it claims ₹9,000 as input tax credit, which it can use against its output tax.

The net cost is nil for a fully taxable business, but it must have ₹9,000 in cash first and must not forget the entry. A business making exempt supplies, or one that cannot claim credit, bears the ₹9,000 as a real cost.

Reverse charge for small businesses

Composition taxpayers must also pay reverse charge tax at the normal rate, and they cannot claim it back as credit. Unregistered persons do not pay RCM on their purchases in most cases, but a person who becomes liable for RCM must register.

Proposed changes

The 57th GST Council meeting on 8 October 2026 recommended bringing plastic scrap, e-waste, tyre waste and used cooking oil under reverse charge when an unregistered person supplies them to a registered person, with 2% TDS on such supplies between registered persons. It also recommended e-invoicing for reverse charge purchases from unregistered persons for businesses with turnover of ₹5 crore or more. These apply only after notification.

Common mistakes

Forgetting RCM on legal fees, director sitting fees or freight because the bill shows no GST
Paying RCM tax from the credit ledger instead of cash
Not issuing self-invoices for purchases from unregistered suppliers
Treating imported software subscriptions or online advertising from foreign companies as tax-free, when IGST is payable under reverse charge by a registered business

Work out the tax under reverse charge with our GST calculator.