Summary: The Reverse Charge Mechanism (RCM) under GST requires the recipient, rather than the supplier, to pay tax on certain supplies. The flowchart for RCM clarifies that if the supplier is registered, the standard GST procedure applies, but if the supplier is unregistered, RCM comes into play. There is a specified list of services that are subject to RCM, where the recipient must pay GST, including services from foreign suppliers, goods transport agencies (GTA), legal services, sponsorship services, and services from government bodies to business entities. Other services covered under RCM include those from directors to companies, insurance agents to insurance businesses, recovery agents to financial institutions, and security services. Additionally, RCM applies to various real estate-related services like renting of motor vehicles and residential dwellings to registered persons. The mechanism also extends to long-term land leases and direct selling agent services. In all cases, the recipient of the services is responsible for paying the tax and can avail of input tax credit (ITC) where applicable.
Flowchart explaining RCM on supply:
– Start
– Is the supplier registered?
– Yes: Normal GST (Supplier Pays GST) → End
– No: Check RCM applicability
– Yes: Recipient Pays GST → Avail ITC (if eligible)
– No: End
List of RCM Supply of services
The List of RCM Supply of services are as follows (supply may or may not apply subject to certain conditions):
| S. No. | Nature of Supply | Supplier of Services | Recipient of Services |
| 1 | Any Services received from Outside India (Except Non-Taxable Online Recipient) | Any person located outside India | Any person located in India |
| 2 | Services provided by a goods transport agency (GTA) in respect of transportation of goods by road to Specified recipients | GTA | Specified recipients such as factories, societies, cooperative societies, registered persons, body corporates, partnership firms, or casual taxable persons. |
| 3 | Legal services, including representational services before any court or tribunal. | Individual advocate or firm of advocates | Any business entity located in India providing supply exceeding Rs. 20 Lakhs |
| 4 | Services provided by an arbitral tribunal. | Arbitral tribunal | Any business entity located in India |
| 5 | Sponsorship services provided to any body corporate or partnership firm. | Any person other than a body corporate | Any body corporate or partnership firm located in the taxable territory. |
| 6 | Services supplied by the Central Government, State Government, Union Territory, or local authority to a business entity, excluding certain services. | Central Government, State Government, Union Territory, or local authority | Any business entity located in India |
| 7 | Services provided by a director of a company or body corporate. | Director | The company or body corporate located in the taxable territory. |
| 8 | Services provided by an insurance agent. | Insurance agent | Any person carrying on insurance business, located in the taxable territory. |
| 9 | Services provided by a recovery agent. | Recovery agent | Banking companies, financial institutions, or non-banking financial company located in taxable territory. |
| 10 | Transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957. | Music composer, photographer, artist, Author or the like | Music company, Producer, Publisher or the like, located in India |
| 11 | Supply of services by the members of Overseeing Committee to Reserve Bank of India. | Members of Overseeing Committee | Reserve Bank of India. |
| 12 | Services provided by business facilitator (BF) to a banking company. | Business facilitator | Banking company located in India |
| 13 | Services provided by an agent of business correspondent (BC) to business correspondent. | Agent of business correspondent | Business correspondent located in India |
| 14 | Security services | Any person other than a body corporate | Registered person |
| 15 | Renting of any motor vehicle to a body corporate. | Any person other than a body corporate, who does not opt to pay tax at the rate of CGST 6% | Any body corporate located in India |
| 16 | Services of lending of securities under Securities Lending Scheme, 1997 of SEBI. | Lender | Borrower |
| 17 | Services provided by way of renting of residential dwelling to a registered person. | Any person | Registered person |
| 18 | Services provided by way of transfer of development rights or Floor Space Index (FSI) for Construction | Any person | Promoter (Builder) |
| 19 | Renting of immovable property to a registered person by Central Government, State Government, Union Territory, | Central Government, State Government, Union Territory | Registered person |
| 20 | Direct Selling Agents (DSAs) Services | Individual Direct Selling Agents | A banking company or a NBFC |
| 21 | Long term lease of land (30 years or more) against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges) | Any person | Promoter |
| 22 | Services provided by way of renting of any property other than residential dwelling | Unregistered person | Registered person |
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Author of this article can be reached at caharishatg@mail.ca.in
Disclaimer: The content of this article is for general informational purposes only and does not constitute professional advice. While every effort has been made to ensure the accuracy of the information, no responsibility is taken for any errors or omissions. Readers are encouraged to seek professional advice before acting on any information provided herein. The views expressed are personal and do not necessarily reflect the opinions of any organisation or entity associated with the author.
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