GST Reverse Charge Mechanism: Liability, Cash Payment and ITC
Reviewed by CA Nikhil Gupta · Last reviewed 30 August 2026
Under reverse charge, the recipient pays GST on notified supplies or specified import of services.
Use the GST Reverse Charge Applicability Checker to apply these points to your figures or facts.
The liability is paid through the electronic cash ledger, and eligible ITC can be claimed after satisfying invoice, receipt, payment and business-use conditions.
Legal or Computational Framework
Governing rule
RCM can arise under notified section 9(3) or 5(3) supplies and limited notified section 9(4) or 5(4) cases. The recipient may need a self-invoice and payment voucher where the supplier does not issue an Indian tax invoice.
For the connected rule, example or next step, see Reverse Charge Mechanism: RCM Calendar for Startups and MSMEs.
Correct workflow
Identify notified supply and recipient category; determine time and place of supply; raise required document; pay tax in cash; report RCM; claim eligible ITC and reconcile vendor or import records.
Step-by-step method
- Identify notified supply and recipient category.
- determine time and place of supply.
- raise required document.
- pay tax in cash.
- report RCM.
- claim eligible ITC and reconcile vendor or import records.
Worked example
An Indian company imports consulting service from an overseas provider for business use. It computes IGST under RCM, pays in cash and can claim eligible ITC, subject to place-of-supply and documentation rules.
The example is an audit trail, not a substitute for the user's facts. Change one input—residence, payment date, tax year, asset, return form, GST status, employer category or supporting document—and the result can change.
Edge cases
- Legal and director services have recipient-specific notifications: record the factual and legal conclusion in the working paper.
- Related-establishment import can arise without ordinary consideration: record the factual and legal conclusion in the working paper.
- Composition taxpayers pay RCM but cannot claim ITC: record the factual and legal conclusion in the working paper.
- Registration implications need review: record the factual and legal conclusion in the working paper.
- RCM cannot be paid using ITC: record the factual and legal conclusion in the working paper.
What Generic Pages Miss
- Treating every unregistered purchase as RCM.
- Using credit ledger to pay RCM.
- Claiming ITC before tax payment.
- Missing import services.
- Failing to self-invoice where required.
For the connected rule, example or next step, see GST on Director Services and Reverse Charge: Step-by-Step Compliance Playbook.
Generic pages often confuse gross income with net receipt, TDS with final tax, GST turnover with income-tax turnover or a portal value with legal eligibility. Finin2min should show why an amount is accepted, deferred, reversed, rejected or carried forward.
Practical Documentation Checklist
- Vendor/category matrix
- Notification extract
- Self-invoice/payment voucher
- Foreign invoice/remittance
- Cash-ledger payment
- ITC claim record
See the broader GST & Indirect Tax knowledge hub for related rules and calculators on this topic.
Finin2min Summary
Under reverse charge, the recipient pays GST on notified supplies or specified import of services. The liability is paid through the electronic cash ledger, and eligible ITC can be claimed after satisfying invoice, receipt, payment and business-use conditions.
Finin2min rule: classify the legal event, calculate from source records and show every adjustment.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- GST & Indirect Tax
- Official starting point
- www.indiacode.gov.in
Page source links
Primary sources & related provisions
Statutory provisions referenced in this guide: