Also known as: Reverse Charge · Reverse Charge Mechanism
A GST provision that shifts the obligation to pay tax from the supplier to the recipient for specified notified supplies and cases.
Reverse Charge Mechanism (RCM) is a provision under Section 9(3) and Section 9(4) of the CGST Act that shifts the liability to pay GST from the supplier (the default) to the recipient. The recipient is required to compute GST at the prescribed rate, pay it in cash through GSTR-3B, and (subject to Section 17(5) restrictions) claim the same amount back as input tax credit.
Section 9(3) RCM applies on a specified list of supplies regardless of the supplier's registration status — Goods Transport Agency (GTA) services, advocate services to a business entity, sponsorship services, services by a director to the company, import of services, and a few others. Section 9(4) is narrower and applies only when a registered person procures specified goods or services from an unregistered person; this is currently active for promoters in real estate and for inputs used in construction of immovable property.
The recipient records the applicable RCM liability in GSTR-3B Section 3.1(d) and discharges it in cash; it cannot be offset using existing ITC. Any corresponding credit remains subject to eligibility, payment, documentation, and timing conditions. Self-invoice or payment-voucher requirements depend on the transaction and must be reviewed separately.
ReadyBooks.ai provides an explicit reverse-charge selection on a purchase bill. When the user has correctly marked a supported bill, the recorded liability and eligible-ITC amounts feed the GSTR-3B preparation and cash-payment treatment. ReadyBooks does not infer every notified RCM category or automatically create the required supporting document, so applicability and evidence remain a reviewer decision.