GST Reverse Charge Mechanism (RCM): 20 Goods & Services, 2026 Amendments and Compliance

By MUKESH SIKARWAR Goods and Services Tax Articles November 4, 2026

Comprehensive Article on Goods and Services Tax (GST) – Reverse Charge Mechanism (RCM) – Applicable Notifications: 13/2017-CT(R), 04/2017-CT(R), 10/2017-IT(R) as amended by 04/2026-CT(R) & 08/2026-CT(R)

Summary: The Reverse Charge Mechanism under Section 9(3) and 9(4) of the CGST Act is a statutory exception where the liability to pay GST is shifted from the supplier to the recipient. The tax under RCM is required to be discharged strictly in cash through Electronic Cash Ledger and is thereafter available as Input Tax Credit subject to Section 16 and subject to issuance of self-invoice and payment voucher under Section 31(3)(f) and (g).

Under services, nine common transactions are liable. Security services provided by a non-body corporate to a registered person excluding Government departments registered only for TDS and composition dealers, sponsorship services by non-body corporate to a body corporate or partnership firm, services by a Director to his company where salary under employer-employee relationship is outside GST, import of services from outside India where even an unregistered person is liable, GTA freight where GTA has not opted for 12% forward charge and the liability falls on specified recipient, legal services by an advocate or firm of advocates to a business entity, renting of passenger vehicle with fuel by non-body corporate to body corporate where RCM at 18% applies only if supplier does not charge 12%, renting of commercial immovable property by an unregistered landlord to a registered tenant which is effective from 17-10-2023, and renting of residential dwelling to a registered person for business use.

Under goods, eleven common items are covered. Six agriculture allied items namely silk yarn, tendu leaves, tobacco leaves, specified mint oils, cashew nuts and raw cotton where the supply is by an agriculturist to a registered person. Further five items under scrap and waste category where supply is by an unregistered person to a registered person, namely metal scrap falling under Chapters 72 to 81 effective from 10-10-2024, and four new entries effective from 01-11-2026 being tyre waste, electrical and electronic waste, plastic waste and used cooking oil. For all these scrap items the object is to curb fake ITC and to bring unorganized sector under tax net.

Compliance requires payment of RCM liability in GSTR-3B Table 3.1(d), determination of time of supply as date of payment or sixty days for services and thirty days for goods from invoice date whichever is earlier, issuance of self-invoice and payment voucher, and maintenance of a separate RCM register as these transactions do not auto-populate in GSTR-2B. Non-compliance attracts interest under Section 50 and penalty under Section 74 along with denial of ITC.

1. Prelude and Legal Framework

The concept of Reverse Charge Mechanism (RCM) is a departure from the settled principle of indirect taxation where tax is collected and paid by the supplier. Under RCM, the liability to pay tax is cast upon the recipient of goods or services.

The statutory edifice of RCM is enshrined under:

Section 9(3) of the CGST Act, 2017 / Section 5(3) of the IGST Act, 2017: The Government on the recommendations of the Council may notify specific categories of goods or services where the recipient shall be liable to pay GST.
Section 9(4) of the CGST Act, 2017: RCM applicable where goods or services are procured by a registered person from an unregistered supplier for specified classes.
Section 9(5) of the CGST Act, 2017: E-commerce operator liable for specified services.

It is imperative to note that RCM liability is required to be discharged IN CASH by debiting the Electronic Cash Ledger only, and the same cannot be adjusted against Input Tax Credit (ITC). However, the tax so paid under RCM is available as ITC, subject to eligibility under Section 16 and 17 of the CGST Act, and subject to issuance of Self-Invoice and Payment Voucher under Section 31(3)(f) and (g) and Rule 52 of CGST Rules.

The infographic under reference delineates 20 common transactions, which every business enterprise is advised to test on the anvil of RCM compliance.

2. Nine Common Services Liable Under RCM [Notification No. 13/2017-CT(R)]

2.1 Security Personnel Services

Transaction: Service by way of supply of security personnel by a Non-Body Corporate to a Registered Person.
Key Consideration: “Non-Body Corporate” includes Individual, HUF, Firm, AOP. “Body Corporate” is excluded as supplier. However, if the supplier is a Body Corporate, it shall pay under forward charge. Crucial Exclusion: (i) Recipient who is registered solely for TDS under Section 51 (Govt. Departments) is excluded. (ii) A Composition Taxpayer as recipient is excluded. If recipient is composition dealer, supplier (even if non-body corporate) must pay under forward charge.

2.2 Sponsorship Services

Transaction: Services by way of sponsorship provided by any person (other than a body corporate) to a Body Corporate or Partnership Firm.
Key Consideration: If sponsor is a Body Corporate, it pays under forward charge. If recipient is not a Body Corporate or Partnership Firm (e.g., Individual), no RCM.

2.3 Director Services

Transaction: Services supplied by a Director of a company or body corporate to the said company/body corporate.
Key Consideration: This covers services which are in the capacity of a Director. Sitting fees, commission etc. are under RCM. However, salary paid to a Director which is treated as employer-employee relationship under Schedule III is outside the purview of GST. The test is of master-servant relationship as per Income Tax.

2.4 Import of Services

Transaction: Any service imported by a person in India from a person outside India.
Key Consideration: Even an unregistered person importing services for business is liable under RCM if it qualifies as “taxable import”. Place of Supply under Section 13, exemption under Sl. No. 10 of 09/2017-IT(R) for services by RBI etc., and the special provisions for Online Information and Database Access or Retrieval (OIDAR) Services under Section 14 of IGST Act must be meticulously examined.

2.5 Goods Transport Agency (GTA) Freight

Transaction: Where GTA has not opted to pay GST @ 12% under forward charge.
Key Consideration: Liability falls on Specified Recipient – Factory, Society, Co-operative, Registered Person, Body Corporate, Partnership Firm, Casual Taxable Person. Exemptions: (a) Transportation of agricultural produce, milk, salt etc. (b) Where consignment value is upto Rs. 750 per consignee. Rate: RCM is payable @ 5% with no ITC to GTA or @ 12% with ITC. If GTA issues invoice charging 12%, recipient is not liable.

2.6 Legal Services

Transaction: Services by an individual advocate (including senior advocate) or firm of advocates by way of legal services to a Business Entity.
Key Consideration: Representation before Court, Tribunal, Arbitral Tribunal, legal advisory, drafting. Exemption available for (i) Legal services provided to business entity with turnover upto Rs. 20 lakhs (erstwhile threshold) under pre-01-10-2023 law – now redefined. (ii) Services to Non-Business Entity is exempt. If legal services are provided to a non-business entity, no GST.

2.7 Renting of Passenger Motor Vehicle

Transaction: Service by way of renting of any motor vehicle designed to carry passengers where cost of fuel is included in consideration, supplied by a person other than a body corporate to a body corporate.
Key Consideration: RCM applies only if (a) Supplier is non-body corporate (b) Supplier does NOT issue invoice charging GST @ 12%. If supplier charges 12% (with ITC benefit), RCM does not apply. Rate under RCM is 18%. If fuel cost is not included, rate is 5% and not covered under RCM. Notification 08/2026-CT(R).

2.8 Renting of Immovable Property by Unregistered Person

Transaction: Service by way of renting of residential or commercial property, other than residential dwelling, by an Unregistered Person to a Registered Person.
Key Consideration: This is a recent potent anti-evasion measure. If an unregistered landlord gives property on rent to a registered tenant (other than composition dealer), tenant must pay under RCM. Valuation includes maintenance etc. Applicable amendment to Notification 13/2017-CT(R).

2.9 Renting of Residential Dwelling

Transaction: Service by way of renting of residential dwelling to a registered person.
Key Consideration: If residential dwelling is rented to a registered person for use as residence, RCM applies. However, if it is rented for personal use as residence on own account by a sole proprietor in his personal capacity (not for business), it is exempt under Notification 05/2022-CT(R). Commercial use of residential dwelling is always taxable under RCM.

3. Eleven Common Goods Liable Under RCM

3.1 Agriculture & Allied Goods – Agriculturist to Registered Person

1. Silk Yarn (HSN 5004-5006): Manufactured from raw silk/silkworm cocoons by agriculturist to registered person.

2. Tendu Leaves (1404 90 10)

3. Tobacco Leaves (2401)

4. Specified Mint Oils (3301) – Only notified varieties: Unregistered supplier to registered person.

5. Unshelled / Unpeeled Cashew Nuts (0801)

6. Raw Cotton (Kapas) (5201)

Key Consideration for : The essence is that first sale by agriculturist is exempt in hands of agriculturist but taxable in hands of registered recipient under RCM. Chain thereafter is under forward charge. Definition of ‘Agriculturist’ under Section 2(7) of CGST Act is determinative. RCM notification covering agricultural goods.

3.2 Scrap & Used Cooking Oil – Unregistered Supplier to Registered Recipient

This category has witnessed sweeping amendments vide Notification No. 08/2026-CT(R) dated 10-10-2024 and 01-11-2026.

Metal Scrap: The Government has brought all forms of metal scrap under RCM when supplied by an unregistered person to a registered person. The objective is to curb fake ITC availment in the scrap industry. Erstwhile, only notified metals were covered.
Tyre Waste & Scrap (4004) – NEW w.e.f. 01-11-2026
Electrical / Electronic Waste & Scrap (8549) – NEW w.e.f. 01-11-2026 [E-Waste]
Plastic Waste & Scrap (3915) – NEW w.e.f. 01-11-2026
Used Cooking Oil (1518) – NEW w.e.f. 01-11-2026

Key Consideration for : For all five items, the condition precedent is “Unregistered Supplier > Registered Recipient”. If supplier is registered, he shall pay under forward charge. For Waste management companies, this is a critical compliance. The amendment effective 01-11-2026 is to formalize the circular economy and ensure tax collection at recipient end where unorganized sector is supplier.

4. Mandatory Compliance Checklist for Tax Professional

4.1 Cash Payment

Cash Payment: Verify that GSTR-3B Table 3.1(d) shows RCM liability and same is paid in cash.

4.2 Time of Supply

Time of Supply: For RCM, Time of Supply is earliest of (a) Date of Payment as per books (b) 60 days from date of invoice for services (30 days for goods) under Section 13(3)/12(3).

4.3 Self-Invoice

Self-Invoice: Under Section 31(3)(f), recipient must issue self-invoice for goods/services liable under RCM from unregistered dealer.

4.4 Payment Voucher

Payment Voucher: Under Section 31(3)(g), payment voucher at time of payment.

4.5 ITC Reconciliation

ITC Reconciliation: ITC of RCM can be claimed in same month if goods/services are used for taxable business and subject to Section 16(2) conditions, except where blocked. ITC eligibility on RCM tax.

4.6 GSTR-2B

GSTR-2B: RCM invoices will not appear in GSTR-2B as auto-populated, as supplier is unregistered. Maintenance of independent RCM register is sine-qua-non.

5. Conclusion

The list of 20 transactions is illustrative, not exhaustive. The Notifications contain more than 30 entries. Businesses must conduct a vendor-wise and expense-ledger-wise audit with special focus on NEW items notified for 01-11-2026, as departmental scrutiny on scrap and waste is expected to be rigorous in FY 2026-27. Non-payment of RCM leads to interest under Section 50 and penalty under Section 74, besides denial of corresponding ITC.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Stakeholders should refer to the official GSTN Advisory and consult their tax advisor for specific situations.