Reverse Charge Mechanism (RCM) Under GST: Full List of Goods & Services

Normally, when you buy a product or service, the supplier charges you GST, collects it, and pays it to the government. This is called the Forward Charge.

However, under the Reverse Charge Mechanism (RCM), this entire process is flipped upside down. If you buy specific goods or services, the supplier will not charge you tax. Instead, you (the buyer) are legally obligated to calculate the tax, pay it directly to the government, and then claim the Input Tax Credit (ITC).

Failing to pay tax under RCM is a massive compliance risk. This guide breaks down exactly when RCM applicability kicks in and how you can manage it effortlessly in 2026.

What is Reverse Charge Under Section 9(3)?

Section 9(3) of the CGST Act explicitly lists the specific goods and services where the recipient is liable to pay the tax. The government uses this mechanism primarily in unorganized sectors where it is difficult to collect taxes directly from thousands of small suppliers (like truck drivers or freelance security guards).

Instead of chasing the unorganized suppliers, the tax department shifts the liability to the organized corporate buyers who are already registered under GST.

Key RCM Goods

The list of goods under RCM includes agricultural and specialized items mostly sold by unregistered farmers to registered businesses:

• Cashew nuts (not shelled/peeled)
• Bidi wrapper leaves (tendu)
• Tobacco leaves
• Raw cotton
• Silk yarn

Key RCM Services

Services form the bulk of RCM liabilities for everyday businesses. The most common include:

1. RCM on Transport Services: Services provided by a Goods Transport Agency (GTA) who has not opted to pay GST at 12% under forward charge. (Typically liable at 5% under RCM).
2. Legal Services: Any service provided by an individual advocate or a firm of advocates to a business entity.
3. Sponsorship Services: Provided to any corporate body or partnership firm.
4. Director Services: Services supplied by a director of a company to the said company.
5. Security Services: Security personnel provided by any person (other than a body corporate) to a registered person.

👉 Try it yourself: Don’t risk doing the RCM math wrong in your books. Use our RCM Calculator to accurately determine exactly how much tax you owe to the government on these purchases.

How to Claim ITC on RCM

One of the biggest misconceptions about RCM is that it is an additional cost to the business. It is not. It is simply a cash flow timing issue.

Here is exactly how to claim itc on rcm:

1. Pay in Cash: You cannot use your existing ITC balance to pay your RCM liability. When you file your GSTR-3B, you must pay the RCM amount using real cash via a challan.
2. Claim ITC Immediately: Once you have paid the cash to the government in Table 3.1(d) of GSTR-3B, you can immediately claim the exact same amount as Input Tax Credit in Table 4(A)(3) of the very same return.
3. Use the ITC: You can now use this newly claimed ITC to offset your normal output tax liabilities for your own sales.

Note: You can only claim ITC if the goods or services purchased are actually used for the furtherance of your business. If you pay RCM on a personal expense, the ITC is blocked.

Invoicing Under RCM

If you are the supplier providing an RCM service (for example, you are a lawyer providing services to a company), your invoice must clearly state that tax is payable on a reverse charge basis.

You do not add the 18% GST to your invoice total. You just bill for the base amount and add a bold declaration: “Tax payable under Reverse Charge Mechanism.”

If you are generating these types of bills, do not use a generic Word document. Use our GST Invoice Generator which has a specific toggle to properly format RCM-compliant invoices according to Rule 46.

Frequently Asked Questions

Does RCM apply if I buy from an unregistered dealer? Under Section 9(4), buying from an unregistered dealer used to trigger RCM on all items. However, this has been heavily restricted. Currently, Section 9(4) RCM only applies to specific specified persons (mostly builders/promoters buying cement or capital goods from unregistered suppliers). For regular small businesses, buying stationery from an unregistered shop does not trigger RCM.

What is the GST rate under RCM? The rate depends on the exact item or service. For GTA services, it is typically 5%. For legal and security services, it is 18%. Use our GST Calculator to check the standard slab for the service category if you are unsure.

Is RCM applicable on import of services? Yes. If you are an Indian business paying a foreign company for software subscriptions, marketing services, or consulting, you must pay 18% IGST under RCM and then claim the ITC.

Can I adjust my RCM liability against my existing ITC? No. RCM liability must always be paid in cash through the electronic cash ledger.

Keep Your Books Clean

Failing to pay RCM is one of the easiest ways to fail a GST audit. The tax department cross-references your expense ledgers (like “Freight and Cartage” or “Legal Fees”) to see if you paid the corresponding RCM.

Always review your monthly expenses, identify any RCM-liable invoices, and use the correct calculators to ensure your GSTR-3B is filed flawlessly.

(Read next: GST Composition Scheme 2026: Eligibility, Rates & How to Opt In)