Tax & Compliance
Reverse Charge Mechanism (RCM) is a GST provision where the recipient (buyer) of goods or services pays GST directly to the government, instead of the supplier. RCM applies to specific notified services and to most B2B services received from foreign suppliers.
Under normal GST, the supplier collects GST from the buyer and pays it to the government. RCM reverses this — the buyer self-assesses and pays the GST. Two main scenarios: (1) Section 9(3) — government-notified services like advocate services, GTA (goods transport), insurance agent services — always RCM regardless of supplier, (2) Section 9(4) and import provisions — foreign supplier providing services to Indian business. Indian business pays IGST under RCM and claims same as ITC in same return — net cash effect zero.
Industries served: All B2B businesses using foreign SaaS, Companies using legal/advocate services, Logistics buyers using GTA, Manufacturers buying security services, Real estate using legal services
Related terms: GST Input Tax Credit, OIDAR Services, IGST, GSTR-3B, Self-Invoice
Any foreign SaaS provider (AWS US, Microsoft Ireland direct, Slack, Notion, Stripe US, Zoom US direct, Google Ads via Singapore/Ireland) supplied to Indian B2B customers triggers RCM. Indian buyer self-pays 18% IGST in GSTR-3B, claims same as ITC in same return.
Yes. Per GST rules, the recipient under RCM must issue a self-invoice on the date of receipt of goods/services. The self-invoice includes: supplier details, RCM applicability, taxable value, tax amount. This is the document supporting your RCM payment and ITC claim.
No. RCM GST must be paid in cash (electronic cash ledger) in your GSTR-3B return. You cannot use ITC to discharge RCM. After paying in cash, you can claim the same amount as ITC in the same return — effectively the cash sits in your electronic credit ledger as ITC for future use.
You lose the ITC and effectively overpay 18% extra on that service. Worse, in a GST audit, missed RCM can attract penalty + interest. Best practice: monthly review of foreign-currency credit card statements and bank transfers to identify all RCM-applicable transactions before filing GSTR-3B.
For B2B services from foreign suppliers — typically yes. For B2C, the foreign supplier registers under OIDAR GST and charges GST on invoice (no RCM by recipient). For goods imports, customs duty + IGST applies at port-of-entry, not RCM. RCM is most commonly relevant for B2B services and digital services from foreign suppliers.
Free RCM + foreign SaaS GST setup for Indian businesses — accountant-grade compliance.