GST Reverse Charge Mechanism (RCM) Compliance

CBIC Notification 13/2017-CT: RCM under Section 9(3) applies to: GTA (Goods Transport Agency) services — 5% paid by recipient; legal services by individual advocate to business; services by government/local authority to business; import of services; renting of immovable property by unregistered landlord (notified categories); services by director to the company; security services from an unregistered agency. The recipient pays in cash — the electronic credit ledger cannot be used for RCM payment.

Section 9(4) originally required RCM on all B2B purchases from unregistered persons — suspended in 2017. Current position: RCM under Section 9(4) applies only to specific categories notified by CBIC (Notification 7/2019-CT). Most general purchases from unregistered vendors do not attract RCM — category-specific, not a blanket obligation. Check the latest notification for the current list of notified categories.

Yes — GST paid under RCM is available as ITC to the extent the goods/services are used for taxable supply (subject to Section 17(5) blocks). The ITC is available in the same month's GSTR-3B in which the RCM cash payment is made. Important: the RCM tax must be paid in cash before ITC can be availed. Claiming ITC without actual RCM payment is a common error — it leads to demand under Section 73 with 10% penalty plus 18% interest.

The Indian recipient: (a) must obtain GST registration if unregistered (Section 24(iv)); (b) determines IGST rate for the service category; (c) pays IGST via GSTR-3B in cash by the 20th of the following month; (d) claims IGST as ITC in the same GSTR-3B. Time of supply: date of payment in books or date of debit, whichever is earlier. No Form 15CA/15CB required for RCM payment — that is an Income Tax Act obligation separate from GST.

Residential property rented by an unregistered individual to a registered business (for business use): 18% GST under RCM since Notification 05/2022-CT(Rate) effective 18 July 2022. This covers many small offices using residential apartments. Exemption: if residential property is rented for residential purpose only (not for business). Commercial property rented by unregistered landlord: check current notification for RCM applicability — position has changed periodically.