Who Pays GST When the Buyer Becomes Liable?
🔷 1. Reverse Charge Mechanism (RCM) – In Simple Terms
Under GST, tax is normally paid by the supplier.
However, in certain notified cases, GST must be paid by the recipient — this is called Reverse Charge Mechanism (RCM).
📌 Legal basis: Section 9(3) of CGST Act, 2017
🔷 2. Key Notification Governing RCM on Services
| Particular | Details |
|---|---|
| Principal Notification | Notification No. 13/2017 – CT (Rate) |
| Date | 28 June 2017 |
| Amendments | 16+ amendments up to Dec 2025 |
| Coverage | Notified services only |
| Liability | Recipient pays GST under RCM |
🔷 3. Complete List of Services Notified Under RCM (Validated)
RCM on Services – Master Table (2025)
| Sl. | Nature of Service | Service Provider | Service Recipient (Liable to Pay GST) | Key Conditions / Exceptions |
|---|---|---|---|---|
| 1 | Goods Transport Agency (GTA) | Any GTA | Registered person / factory / society / body corporate / LLP / partnership | ❌ If supplier opts forward charge & declares on invoice |
| 2 | Legal services | Individual advocate / firm | Any business entity | Includes advisory, consultancy & representational |
| 3 | Arbitral tribunal services | Arbitral tribunal | Any business entity | No threshold exemption |
| 4 | Sponsorship services | Any person (non-body corporate) | Body corporate / partnership / LLP | Recipient liable |
| 5 | Govt./Local Authority services (excluding notified exemptions) | Govt./Local authority | Business entity | Excludes post, railways, transport, aircraft/vessel |
| 6 | Renting of immovable property (Govt.) | Govt./Local authority | Registered person | Mandatory RCM |
| 7 | Renting of residential dwelling | Any person | Registered person | Introduced via 2022 amendment |
| 8 | Renting of immovable property (non-residential) | Any person | Registered person | ❌ Not applicable to composition dealers |
| 9 | Transfer of Development Rights / FSI | Any person | Promoter | Payable at time of completion |
| 10 | Long-term lease of land (≥30 yrs) | Any person | Promoter | Upfront premium / rent covered |
| 11 | Director’s services | Director | Company / body corporate | Includes executive & non-exec directors |
| 12 | Insurance agent services | Insurance agent | Insurance company | Standard RCM entry |
| 13 | Recovery agent services | Recovery agent | Bank / FI / NBFC | Includes loan recovery |
| 14 | Copyright – music/artistic works | Artist / composer | Music company / producer | Includes assignment or licensing |
| 15 | Copyright – literary works | Author | Publisher | ❌ Forward charge allowed with declaration |
| 16 | Overseeing Committee services | Committee member | RBI | Specific RBI notification |
| 17 | Direct Selling Agent (DSA) | Individual DSA | Bank / NBFC | ❌ Not applicable if DSA is body corporate |
| 18 | Business Facilitator (BF) | BF | Bank | Banking outreach services |
| 19 | Agent of Business Correspondent (BC) | Agent | Business Correspondent | Inter-BC services |
| 20 | Security services | Security agency | Registered person | ❌ Not applicable if supplier under composition |
| 21 | Motor vehicle rental (fuel included) | Non-body corporate | Registered person | Invoice must not charge GST |
| 22 | Securities lending services | Lender of securities | Borrower of securities | As per SEBI Scheme, 1997 |
🔷 4. Common Exceptions You Must Remember
| Scenario | RCM Applicable? |
|---|---|
| Recipient registered only for TDS | ❌ No |
| Supplier under composition scheme | ❌ No |
| GTA opts forward charge (5%/12%) | ❌ No |
| Author opts forward charge with declaration | ❌ No |
🔷 5. Compliance Obligations Under RCM
| Particular | Requirement |
|---|---|
| Invoice | Self-invoice if supplier unregistered |
| Tax payment | Cash only (no ITC utilisation) |
| Return | Report in GSTR-3B |
| ITC | Eligible subject to Section 16 |
| Time of supply | As per Section 13 |
🔷 6. Practical Takeaways (Finin2min Insight)
✔ RCM applies only to notified services
✔ Liability shifts to recipient, not supplier
✔ ITC is available after payment of tax
✔ Errors in RCM = interest + penalty exposure
🔷 7. One-Line Summary
If a service appears in Notification 13/2017, always check who pays GST — because under RCM, the buyer often pays.
📌 Finin2min Recommendation
Businesses should:
- Map vendors against RCM list
- Review contracts & invoices
- Ensure cash flow planning for RCM tax
- Automate RCM checks in ERP/accounting systems
