Section 9(3) & 9(4), CGST Act 2017
Reverse Charge Mechanism (RCM) under GST
Under reverse charge, the recipient — not the supplier — pays the GST. Miss it and you under-report liability; get the ITC timing wrong and you over-claim. Here's how it works.
When reverse charge applies
- Section 9(3) — on notified goods and services, e.g. goods transport agency (GTA), legal services by an advocate, services of a director to the company, sponsorship, and import of services.
- Section 9(4) — on specified supplies received from unregistered persons by notified classes of registered persons (e.g. promoters in real estate).
Pay in cash, then claim ITC: RCM liability must be discharged in cash — it cannot be set off using ITC. The tax so paid is then available as ITC (if otherwise eligible), typically in the same period.
Compliance points
- Self-invoicing is required for supplies received from unregistered persons under Section 9(4) (Section 31(3)(f)).
- RCM liability is reported in GSTR-3B Table 3.1(d); the corresponding ITC in Table 4.
- The RCM liability declared should reconcile with the ITC claimed on reverse charge.
How GSTBuddies checks RCM
GSTBuddies reconciles the reverse-charge liability declared in GSTR-3B against the corresponding ITC, flags mismatches, and cites Section 9(3)/9(4). Explore the full compliance suite or Section 17(5) blocked credits.
FAQ
Can I pay RCM liability using ITC?
No. Reverse-charge tax must be paid in cash; it cannot be discharged using the credit ledger. The tax paid is then available as ITC if eligible.
Is self-invoicing required under RCM?
Yes, for supplies received from unregistered suppliers under Section 9(4) — the recipient issues a self-invoice under Section 31(3)(f).