Reverse Charge Mechanism (RCM): Definition, Meaning & Guide for Indian Businesses

Under RCM, the buyer pays GST to the government instead of the seller. Applies to specified goods, services, and any purchase from unregistered suppliers above threshold.

What is Reverse Charge Mechanism (RCM)?

Reverse Charge Mechanism (RCM) flips the usual GST flow. Normally the supplier collects GST and deposits it. Under RCM, the recipient (buyer) pays GST directly to the government. RCM applies to: (1) specific notified goods and services (legal services from individual advocates, GTA services, sponsorship, director services); (2) purchases from unregistered suppliers above the daily threshold; (3) import of services. The buyer can claim ITC on the RCM GST paid in the same return where it is declared.