Reverse charge mechanism (RCM) under GST explained

Under the reverse charge mechanism (RCM), the recipient of goods or services pays GST to the government instead of the supplier collecting it. It flips the normal flow, and it applies only in specific notified cases — so most invoices are not reverse charge, but the ones that are must be handled correctly. Here is what RCM means in practice.

The list of goods and services under RCM is set by notification and changes over time. Confirm the current list for your transactions with the GST portal or your CA.

Normal charge vs reverse charge

Normally, the supplier charges GST on the invoice, collects it from the buyer, and pays it to the government (forward charge). Under reverse charge, the supplier does not collect GST; instead, the buyer is liable to pay it directly to the government and reports it in their return.

When RCM applies

RCM typically applies in cases such as:

• Notified goods and services where the government has specified reverse charge;
• supplies from an unregistered supplier to a registered person in certain notified situations; and
• specific categories (for example, certain services like goods transport, legal services, or import of services) as notified.

Because the list is specific and updated, do not assume RCM — check whether your transaction is actually covered.

How it shows on the invoice

Where RCM applies, the invoice should indicate that tax is payable on reverse charge. The supplier does not add GST to collect; the recipient self-accounts for it. This is one of the mandatory invoice fields to flag when relevant.

Can you claim ITC on RCM tax?

Generally, the recipient who pays GST under reverse charge can claim it as input tax credit, subject to the usual conditions and provided it is used for business supplies. So RCM is often cash-flow timing rather than a permanent cost — but the paperwork must be right.

Handling it cleanly

The keys are: correctly identify RCM transactions, flag them on the invoice, self-account for the tax, and report it properly. Billing and record-keeping software that lets you mark reverse-charge supplies keeps this straight. Invoicify helps you produce compliant invoices and organised records so RCM cases are captured rather than missed. Start a free trial to see how it fits.

RCM is narrow but important. Know the notified cases, flag them on the invoice, and account for the tax as the recipient — and it becomes a routine part of compliance rather than a surprise.