Normally the supplier collects GST and pays it to the government. Under the reverse charge mechanism (RCM), that responsibility flips — the recipient of the goods or services has to pay the tax directly. RCM applies in specific situations, and businesses that fall into them need to recognise the liability, pay it correctly, and account for any credit. Here's how reverse charge works under GST.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-15
Quick answer
Under reverse charge, the recipient pays GST instead of the supplier. Here's when RCM applies, how to pay it, and how it affects your input tax credit.
Reverse charge is a mechanism where the liability to pay GST shifts from the supplier to the recipient. Instead of the supplier charging tax on the invoice and depositing it, the recipient calculates the tax on the supply and pays it directly to the government. The purpose is to bring certain transactions and suppliers within the tax net more effectively. Because the obligation moves to the buyer, RCM is something the recipient has to actively watch for — it is easy to miss a liability that the supplier has not charged on the invoice.
RCM applies in defined situations rather than across the board. Broadly, it can apply to notified categories of goods and services, and to certain supplies received from unregistered persons. Specific services and supplier types are notified as falling under reverse charge, and these notifications can change over time. Because the list is specific and subject to updates, the safe approach is to check whether a particular purchase falls under RCM rather than assuming it does not — confirm the current position before deciding how to treat a transaction.
Reverse charge interacts with registration. A person who is required to pay tax under reverse charge is one of the categories that must register for GST regardless of turnover, so the usual threshold does not provide protection where RCM applies. If your business receives supplies that fall under reverse charge, this can pull you into mandatory registration even if your turnover is otherwise below the limit. Check your incoming supplies against the reverse-charge categories so that a registration obligation does not catch you by surprise.
Tax under reverse charge is generally paid in cash rather than set off against existing credit, and it must be accounted for in the relevant return period. Once you have paid the reverse-charge tax, you may be able to claim it back as input tax credit, provided the supply is used for your business and the normal credit conditions are met. The recipient under RCM is also typically required to keep proper documentation for the supply. Treat the payment and the credit as two separate steps, and make sure both are reflected correctly in your returns.
The main risk with RCM is simply not noticing it. Because the supplier may not charge tax on the invoice, the recipient can overlook a liability that is genuinely theirs to pay, leading to short payment, interest and disallowed credit. Build a habit of screening purchases against the reverse-charge categories, recognise the liability in the correct period, pay it as required, and then claim any eligible credit. When you are unsure whether a particular supply attracts reverse charge, get it confirmed before filing.
It is a mechanism where the recipient, rather than the supplier, is liable to pay GST on a supply. The recipient calculates the tax, pays it directly to the government, and accounts for it in the relevant return — so it is the buyer who has to watch for the liability.
It applies in defined situations, such as notified categories of goods and services and certain supplies from unregistered persons. The notified list is specific and can change, so confirm whether a particular purchase falls under RCM rather than assuming it does not.
Often yes — once you have paid the reverse-charge tax you may claim it as input tax credit, provided the supply is for your business and the normal credit conditions are met. Treat the payment and the credit as separate steps and reflect both correctly in your returns.
Worried a purchase might attract reverse charge? Write to the firm and we'll check your supplies against the RCM categories and make sure you pay and claim it correctly.