What reverse charge means
Normally the seller collects GST from you and pays it to the government. Under reverse charge, you, the buyer, pay it directly. The CGST Act, section 9 allows this in two ways:
- Section 9(3): the government notifies categories of goods or services where the recipient pays.
- Section 9(4): the government notifies a class of registered persons who pay tax on specified purchases from unregistered suppliers.
Services under reverse charge
From Notification 13/2017-Central Tax (Rate) and its amendments. This is not the full list; read the notification for the conditions on each line.
| Service | Supplier | Who pays under reverse charge |
|---|---|---|
| Transport of goods by road by a GTA | A GTA that has not opted to pay tax itself | Listed recipients, including registered persons, factories, societies, co-operatives, body corporates and partnership firms |
| Legal services | An individual advocate or a firm of advocates | A business entity |
| Arbitral tribunal services | An arbitral tribunal | A business entity |
| Sponsorship | Any person other than a body corporate (since 16 Jan 2025) | A body corporate or partnership firm |
| Services of a director | A director | The company or body corporate |
| Insurance agent services | An insurance agent | A person carrying on insurance business |
| Recovery agent services | A recovery agent | A bank, financial institution or NBFC |
| Renting of a residential dwelling | Any person | A registered person |
| Renting of other property, such as an office or shop | An unregistered person (since 10 Oct 2024) | A registered person, other than a composition taxpayer (since 16 Jan 2025) |
| Security services (supply of security personnel) | As listed in the notification | A registered person, with exceptions such as government bodies registered only to deduct TDS |
Goods under reverse charge
From Notification 4/2017-Central Tax (Rate), for example:
| Goods | Supplier | Buyer |
|---|---|---|
| Cashew nuts, not shelled or peeled | An agriculturist | Any registered person |
| Bidi wrapper (tendu) leaves | An agriculturist | Any registered person |
| Tobacco leaves | An agriculturist | Any registered person |
| Used cooking oil; plastic waste and scrap; tyre waste and scrap; electrical and electronic waste | An unregistered person (from 1 Nov 2026) | Any registered person |
Step by step, with an example
Example. Kaveri Agencies, Mysuru, rents a godown from an unregistered owner for ₹40,000 a month. Kaveri is a regular GST taxpayer.
- Self-invoice. Kaveri issues an invoice to itself within 30 days of receiving the service (rule 47A).
- Work out the tax. At 18%, that is ₹7,200: ₹3,600 CGST + ₹3,600 SGST.
- Pay in cash. The ₹7,200 goes in GSTR-3B table 3.1(d), inward supplies liable to reverse charge, and is paid from the cash ledger.
- Claim the credit. The same ₹7,200 is claimed as input tax credit in GSTR-3B table 4(A)(3), in the same return if the conditions for credit are met.
- Net effect. Cash goes out once and comes back as credit to use against output tax. The cost is the cash flow, plus interest if you pay late.
Check the rate that applies to your service before you calculate. Rates changed for many items on 22 Sep 2025; see GST rates.
Reporting and the RCM statement
- The GST portal keeps an RCM Liability/ITC Statement, from August 2024 for monthly filers. It tracks what you declared in table 3.1(d) and the credit you claimed in tables 4(A)(2) and 4(A)(3).
- GSTN said on 29 Dec 2025 that the portal will soon stop credit claims above that statement’s balance.
- On 8 Oct 2026 the 57th GST Council recommended a formal rule (86D) for an “Electronic Statement of tax paid on Reverse charge basis and input tax credit claimed”. The CGST (Amendment) Rules notified on 26 Oct 2026 do not include it, so it is not yet law. Check the current notification.
- From 1 Jan 2027, businesses that e-invoice must also report reverse-charge purchases from unregistered suppliers to the IRP. See e-invoicing.
How MyRecords helps
- Purchases: tax rows that you mark as reverse charge on a purchase bill are read as your reverse-charge liability and placed in the GSTR-3B file it prepares, with the credit in 4A(3). The bill prints as a Self-invoice (RCM) for a supply from an unregistered supplier.
- Sales: where your supply is under reverse charge, the tax is shown and reported on the invoice and in the GSTR-1 file, but not charged to the buyer or booked.
- Not yet automatic: MyRecords does not post the cash payment for you. Your accountant does that. A CA review of this feature is pending, so check your first returns with your CA.
See Reverse charge in MyRecords, or check a purchase with the free tools.