By CA Arpan Bohra (FCA, CS), Arpan Bohra & Co., Chartered Accountants, Hyderabad. Position of law as at 20 October 2026.
Reverse charge is where the tax is yours, even though the invoice isn’t.
A company pays an advocate ₹1 lakh, a transporter ₹50,000 and a non-executive director ₹6 lakh. None of the invoices shows GST, and the accounts team pays them in full. The tax is still the company’s liability under reverse charge. Missed RCM is a favourite audit finding because it appears in the books, not just the returns.
Under reverse charge, the recipient pays the tax. Section 9(3) of the CGST Act, 2017 covers goods and services notified by the Government, and section 5(3) of the IGST Act covers imports of services. Common cases are goods transport agency (GTA) services, services by an advocate or a firm of advocates to a business entity, security services from an unregistered supplier, sponsorship, directors’ fees (not salary) and residential dwelling rent to a registered person. The tax is paid in cash, and credit is claimed in the same month if the input is eligible. Section 9(4), covering purchases from unregistered suppliers, remains limited to specified classes (verify).
Common reverse charge supplies
| Supply | Position (verify the current notification) |
|---|---|
| GTA services | Recipient who is a registered person, factory, society, body corporate, partnership firm or similar pays the tax unless the GTA has opted for forward charge |
| Legal services by an individual or firm of advocates | RCM when received by a business entity |
| Security services | RCM when supplied by a person other than a body corporate to a registered person |
| Director services | RCM for non-executive directors’ fees; salary to an employee-director is outside GST per CBIC Circular 140/10/2020 |
| Sponsorship services | RCM on a body corporate or partnership firm |
| Residential dwelling rent | RCM when the tenant is a registered person, from 18 July 2022 (verify the current position, including exemptions for personal use) |
| Import of services | IGST under reverse charge on the recipient, subject to the related-person exemption, if any |
| Unregistered supplier of goods and services | Section 9(4) applies only to notified classes, such as certain real estate promoters |
Time of supply and ITC
- Section 13(3) fixes the time of supply for services under RCM as the earlier of the date of payment or the 61st day after the invoice (or after the supply, if there is no invoice).
- The recipient must issue a self-invoice for the supply from an unregistered supplier and a payment voucher where applicable.
- The tax is paid through the cash ledger; the credit is available in the same month if the input service is eligible and not blocked under section 17(5).
- Reverse charge liability is reported in Table 3.1(d) of GSTR-3B and the matching credit in Table 4A(3).
Worked example
A company receives legal services of ₹1,00,000 from an advocate on 10 August, and pays the fee on 20 August.
- RCM applies because the service is by an advocate to a business entity.
- Tax at 18%: ₹18,000, payable in cash for August and reported in GSTR-3B for August.
- The company claims credit of ₹18,000 in the same return if the services are used for business and are not blocked.
- If the invoice is not accounted for, the department may demand the tax with interest and penalty on a mismatch with the books.
Audit traps
| Trap | Risk | Fix |
|---|---|---|
| Paying the advocate or GTA without tax | Demand with interest | Run a vendor RCM master |
| Treating director fees as salary | Demand for tax on fees | Separate employees from non-executive directors |
| Tenant registered, landlord unregistered | RCM on residential rent | Check the use of the property and the current exemption |
| Late payment of RCM | Interest at 18% | Pay in the month of liability |
| ITC on RCM when blocked | Credit disallowed | Check section 17(5) first |
Frequently asked questions
What is reverse charge in GST?
Is GST payable by the company on advocate fees?
Is GST charged on director remuneration?
Can ITC be claimed on reverse charge tax?
What is the time of supply under RCM?
Does section 9(4) apply to all unregistered purchases?
Arpan Bohra & Co., Chartered Accountants, Himayat Nagar, Hyderabad.
This article is shared for general professional education. Readers may write to the firm for information about its practice areas.
General educational information as at 20 October 2026. It is not legal or tax advice and does not create a professional relationship. Provisions, rates and thresholds change; verify the current law and notifications before acting. References to the 57th GST Council (8 October 2026) are to recommendations that need amendments or notifications before they have legal effect.
This article is for general information and is not professional advice. Law and rates change; please consult us before you act.