Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
What RCM is and common cases
The buyer is liable to pay GST: GTA freight, advocate fees, director’s remuneration, sponsorship, and import of services are typical.
Pay in cash, claim ITC
RCM must be paid in cash (not from credit), but you can usually claim it back as input credit in the same period if eligible.
Self-invoicing, cash payment and common triggers
Reverse charge shifts the liability to the recipient in two situations: a notified category of supply (such as goods transport agency freight, an advocate’s legal services, director’s remuneration that isn’t salary, sponsorship, security services, and import of services), or a notified supply received from an unregistered person. When you pay under reverse charge you must do two things many businesses miss: issue a self-invoice for supplies from an unregistered supplier, and pay the tax in cash through the electronic cash ledger — it can’t be set off from input credit. You then usually claim that tax back as input credit in the same period, provided the supply isn’t blocked under Section 17(5), so for many businesses reverse charge is cash-flow-neutral but not paperwork-neutral. Import of services and GTA freight are the cases that catch growing businesses out, because the liability arises even though the supplier never charged GST. The practical controls are to flag reverse-charge expenses in your accounting system, generate the self-invoices and a payment voucher, pay the tax in cash in the right month, and claim the matching credit — reconciling all of it in GSTR-3B. Confirm whether a particular expense attracts reverse charge, since the notified list is updated from time to time.