Free GST Reverse Charge (RCM) Calculator

Reverse charge mechanism is one of the most missed parts of GST compliance. The rules are simple in principle but easy to overlook in practice — a legal fee invoice from your advocate looks like any other bill, but RCM applies and you owe 18% GST to the government even though the advocate didn't charge it on the invoice.

This calculator gives you a yes/no answer with the legal reasoning, computes the tax payable, and flags ITC eligibility. Use it as a quick check before paying any unfamiliar invoice, and as a training tool for your team.

The notified categories under Notification 13/2017-CT(R) and Notification 10/2017-IT(R) are the most common source of RCM liability. The full list:

• Goods Transport Agency (GTA) — services to a factory, society, cooperative, registered person, body corporate, partnership, or casual taxable person. Rate: 5% without ITC for the GTA or 12% with ITC.
• Legal services by an advocate / firm of advocates — to a business entity. Even if your retainer agreement does not mention GST, you owe 18% RCM on every payment.
• Director services — services supplied by a director of a company to the company in a capacity other than as an employee. Sitting fees, commissions, and consulting paid to non-executive directors fall under RCM at 18%.
• Sponsorship — services to a body corporate or partnership firm. The sponsor (recipient of branding) pays 18% under RCM.
• Government / local authority services — services other than renting of immovable property, postal services, and a few exemptions. RCM applies on the business recipient at the applicable rate.
• Import of services — under Section 5(3) of the IGST Act, any service imported from outside India by a business is RCM-liable at IGST rate. Software licenses from a US vendor, Google Ads, Facebook Ads, Zoom, AWS — all RCM if you don't have a domestic invoice.
• Renting of motor vehicle — to a body corporate, where the supplier is not a body corporate and does not pass GST at 12%. RCM applies at 5% without ITC.
• Insurance agent services — to insurance companies.
• Recovery agent services — to banks / NBFCs.
• Author / music composer services — to publishers, music companies, etc.
• Direct selling agent services — to banks / NBFCs.
• Lottery distributor services — to state governments.

This list is amended via GST Council notifications. Always cross-check with the latest CBIC notification if you encounter an unusual category.

Section 9(4) was originally drafted to apply RCM on all purchases from unregistered suppliers above ₹5,000 per day, but the rule was effectively suspended from October 2017. The current scope is narrow:

• Real estate developers — RCM applies on procurement of inputs and input services from unregistered suppliers, capped at 80% of total procurements at certain rates.
• Specific notified scenarios — the GST Council can re-notify 9(4) RCM at any time for particular categories.

For routine SME business operations (purchasing stationery from a small shop, paying a small-scale freelancer who is below the ₹20L registration threshold), Section 9(4) RCM does not currently apply. Treat such purchases as forward-charge with no GST.

The end-to-end RCM compliance flow:

1. Identify the supply. Every month, scan vendor invoices for the categories above — legal fees, GTA, director payments, import-of-service invoices.
2. Issue a self-invoice if required. For Sec 9(4) and notified import of services, generate a self-invoice under Rule 46. For Sec 9(3) where the supplier is registered (e.g., a registered GTA), the supplier's invoice with an RCM note suffices.
3. Compute the tax. Apply the forward-charge rate to the invoice value. The GST rate is the same as if the supplier had charged forward — only the payment direction changes.
4. Pay the tax in cash. RCM tax must be paid via the electronic cash ledger, not via ITC. Report under Table 3.1(d) of GSTR-3B for the month the supply is received.
5. Claim ITC in the next month. The RCM tax paid is eligible as input tax credit, subject to the usual ITC rules. Report in Table 4(A)(3) of the next GSTR-3B.
6. Maintain documentation. Keep the original supplier invoice (or self-invoice) and the GST challan together. An RCM audit notice will ask for both.

RCM is revenue-neutral on paper — you pay the tax this month and claim it back next month. But the cash-flow effect can be material for service businesses with regular RCM exposure:

• Lawyer pays ₹2L legal fees in March, RCM tax = ₹36,000. You pay ₹36,000 in cash by 20 April (GSTR-3B due date for March). You can claim it as ITC against your output tax liability in May (filing GSTR-3B for April). Net working capital impact: roughly one month's worth of RCM tax tied up in the cash ledger.
• Annual import-of-service bill ₹1Cr (cloud services). Annual RCM = ₹18L. If billed evenly, the running working-capital lock-up is roughly ₹1.5L at any point in time. Plan accordingly — RCM is not a tax-savings opportunity; it's a compliance load with a temporary cash-flow drag.

If your supplier is a registered person who chose not to charge GST under the assumption that RCM applies, double-check. Some "registered" GTAs prefer to be RCM-liable (so they don't have to maintain GST compliance themselves); others have opted in to forward charge. The status is on the LR / consignment note.

• Forgetting RCM on advocate fees. The single most common miss. A retainer paid quarterly to a CA / advocate / company secretary is RCM-liable at 18% — even if their invoice does not mention GST.
• Paying RCM using ITC. Not allowed. RCM tax must be paid in cash. The cash ledger payment is what generates the ITC entitlement for next month; paying via ITC creates a chicken-and-egg loop the system rejects.
• Missing the self-invoice for imported services. Subscriptions to Google Workspace, AWS, Slack, Notion — any cloud service billed from outside India to your registered office is import of services. Self-invoice required, RCM applies at IGST rate (usually 18%).
• Confusing RCM with TDS under GST. Two different things. TDS under GST (Section 51) applies only to specified persons (government departments, PSUs) at 2% on payments above ₹2.5L. RCM (Section 9) is a tax-shifting mechanism, not a deduction.
• Ignoring RCM on directors' sitting fees. Often overlooked because the payment is treated as a personnel expense. The company is liable for 18% RCM on every payment to a non-executive director.

RCM is a monthly tax discipline, not a one-off calculation. ReadyBooks lets you flag any incoming bill as RCM at the time of entry; the system then auto-creates the cash-ledger debit, posts the journal entries, and surfaces the ITC claim in the next month's GSTR-3B working. Free forever. Save to ReadyBooks above to start.