Calculate RCM Liability
RCM Tax Breakdown
IGST applies for inter-state transactions and import of services
RCM Services Reference
The following services and goods are notified under Section 9(3) and 9(4) of the CGST Act, 2017 where GST is payable under Reverse Charge Mechanism by the recipient.
| Service Category | Supplier Type | Recipient Type | GST Rate | Reference |
|---|---|---|---|---|
| Legal Services | Individual Advocate / Firm of Advocates | Any business entity | 18% | Notification 13/2017-CT(R) |
| Goods Transport Agency (GTA) | GTA (goods transport agency) | Factory, registered person, body corporate, partnership, AOP | 5% / 12% | Notification 13/2017-CT(R), 22/2017-CT(R) |
| Security Services | Any person other than body corporate | Registered person | 18% | Notification 29/2018-CT(R) |
| Manpower Supply | Any person other than body corporate | Body corporate | 18% | Notification 13/2017-CT(R) |
| Renting of Motor Vehicle | Any person other than body corporate | Body corporate | 5% / 12% | Notification 29/2018-CT(R) |
| Sponsorship Services | Any person | Body corporate / partnership firm | 18% | Notification 13/2017-CT(R) |
| Director's Services | Director (not as employee) | Body corporate | 18% | Notification 13/2017-CT(R) |
| Insurance Agent Services | Insurance Agent | Insurance company | 18% | Notification 13/2017-CT(R) |
| Recovery Agent Services | Recovery Agent | Banking company / financial institution / NBFC | 18% | Notification 13/2017-CT(R) |
| Author / Music Composer | Author, music composer, photographer, artist | Publisher, music company, producer | 18% | Notification 13/2017-CT(R) |
| Government Services | Central / State Government, Local Authority | Any business entity | 18% | Section 9(3) CGST Act |
| Import of Services | Person located outside India | Any person in India | 18% | Section 2(11) IGST Act |
Key Information About RCM
What is RCM and When It Applies
Reverse Charge Mechanism (RCM) is a provision under GST where the recipient of goods or services pays the tax instead of the supplier. It applies in two scenarios: (1) supplies notified under Section 9(3) of the CGST Act, where specific categories of supply are listed, and (2) supplies received from unregistered dealers by registered persons for notified categories under Section 9(4). RCM ensures tax collection even when the supplier is small, unregistered, or outside India.
Time of Supply Rules for RCM
For services under RCM, the time of supply is the earlier of: the date of payment recorded in the recipient's books, or 60 days from the date of invoice issued by the supplier. For goods, it is the earliest of: date of receipt of goods, date of payment, or 30 days from the supplier's invoice date. If the time of supply cannot be determined by these rules, it is the date of entry in the recipient's books of account.
ITC Eligibility on RCM
GST paid under RCM is eligible for Input Tax Credit (ITC), provided the goods or services are used for business purposes and the recipient is otherwise eligible for ITC under Section 16 of the CGST Act. The ITC can be claimed in the same month's GSTR-3B. However, certain services at concessional rates (like GTA at 5% or motor vehicle renting at 5%) explicitly restrict ITC availability. The RCM tax itself must always be paid in cash first.
Self-Invoicing Requirement
When the supplier is unregistered, the recipient must issue a self-invoice (also called a payment voucher) for the supply received under RCM. This self-invoice must contain all details that a regular tax invoice would — GSTIN of the recipient, description of goods/services, value, and tax charged. The self-invoice is the document used for claiming ITC on such supplies and must be reported in GSTR-1 and GSTR-3B.
Reporting RCM in GSTR-3B
RCM transactions must be reported in Table 3.1(d) of GSTR-3B under "Inward supplies liable to reverse charge." The total taxable value and tax amounts (IGST, CGST, SGST/UTGST, and Cess) must be declared here. The tax paid under RCM is then available as ITC and can be claimed in Table 4(A)(3) — "Inward supplies liable to reverse charge (other than 1 & 2 above)" — of the same GSTR-3B return. Payment of RCM liability must be made through the electronic cash ledger; it cannot be offset against ITC in the electronic credit ledger.
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Frequently Asked Questions
Under the Reverse Charge Mechanism (RCM), the liability to pay GST shifts from the supplier to the recipient of goods or services. This applies to specified categories of supply as notified under Section 9(3) and Section 9(4) of the CGST Act, 2017. The recipient must pay the tax directly to the government instead of the supplier collecting and remitting it. RCM was introduced to widen the tax base and ensure compliance even for supplies from unregistered or small suppliers.
Key services under RCM include: legal services by individual advocates or firms of advocates, goods transport agency (GTA) services, security services provided by non-body corporate to registered persons, sponsorship services received by body corporates, director services (when not provided as an employee), insurance agent services, recovery agent services, services by authors and music composers to publishers, renting of motor vehicles by non-body corporate to body corporate, government services (other than exempt), and import of services from outside India.
To calculate RCM liability: (1) Identify whether the supply falls under an RCM category as per notifications. (2) Determine the taxable value of the supply from the invoice. (3) Apply the applicable GST rate. For intra-state supply, split the GST equally into CGST and SGST/UTGST. For inter-state supply or import of services, apply the full rate as IGST. For example, on a legal service invoice of Rs 1,00,000, the RCM liability at 18% would be Rs 9,000 CGST + Rs 9,000 SGST for intra-state, or Rs 18,000 IGST for inter-state transactions.
Yes, the recipient can claim Input Tax Credit (ITC) on GST paid under RCM, provided the goods or services are used or intended to be used for business purposes and the recipient is otherwise eligible for ITC under Section 16 of the CGST Act. The ITC can be claimed in the same month's GSTR-3B return in Table 4(A)(3). However, the RCM tax must first be paid in cash through the electronic cash ledger — it cannot be adjusted against existing ITC balance. Note that some services at concessional rates (like GTA at 5%) explicitly deny ITC to the recipient.
For services under RCM, the time of supply is the earlier of: (a) the date of payment as entered in the books of account of the recipient, or (b) the date immediately following 60 days from the date of issue of invoice by the supplier. If neither can be determined, it is the date of entry in the recipient's books. For goods under RCM, the time of supply is the earliest of: (a) the date of receipt of goods, (b) the date of payment, or (c) 30 days from the date of issue of invoice by the supplier.
Under RCM, the recipient of goods or services is liable to pay GST. This includes: registered businesses receiving supplies from specified categories of suppliers (like advocates, GTA, directors), body corporates receiving security or manpower services from non-body corporate suppliers, any person receiving sponsorship services, any person importing services from outside India, and in certain cases, registered persons receiving supplies from unregistered suppliers for notified categories. Even composition scheme dealers and exempt entities must pay RCM on applicable inward supplies.