Decoding Reverse Charge Mechanism (RCM) Under GST

CA. Bhavik P. Chudasama , Last updated: 14 February 2025
Share

The Reverse Charge Mechanism (RCM) is a crucial aspect of the Goods and Services Tax (GST) framework in India, shifting the tax liability from the supplier to the recipient of goods and services. This document provides a summarized overview of the RCM provisions, outlining the applicable goods and services, their suppliers, recipients, and corresponding GST rates. While we have made every effort to present a concise and accurate summary, it is strongly recommended to refer to the latest notifications and updates on the Central Board of Indirect Taxes and Customs (CBIC) Portal before making any business or tax-related decisions

Decoding Reverse Charge Mechanism (RCM) Under GST

A. Supply of Goods under RCM

S. No.	Description of Goods	Supplier	Recipient	GST Rate
1.	Cashew nuts, not shelled or peeled	Agriculturist	Registered person	Applicable GST rate
2.	Bidi wrapper leaves (tendu)	Agriculturist	Registered person	Applicable GST rate
3.	Tobacco leaves	Agriculturist	Registered person	Applicable GST rate
4.	Silk yarn	Manufacturer of silk yarn from raw silk or silk worm cocoons	Registered person	Applicable GST rate
5.	Raw cotton	Agriculturist	Registered person	Applicable GST rate
6.	Supply of lottery	State Government, Union Territory, or local authority	Lottery distributor or selling agent	Applicable GST rate
7.	Used vehicles, seized and confiscated goods, old and used goods, waste and scrap	Central/State Government, Union territory, or local authority	Registered person	Applicable GST rate
8.	Priority Sector Lending Certificate	Registered person	Registered person	Applicable GST rate
9.	Metal scrap	Unregistered person	Registered person	Applicable GST rate

B. Supply of Services under RCM

S. No.	Description of Services	Supplier	Recipient	GST Rate
1.	Services by a goods transport agency (GTA) for transportation of goods (excluding certain items)	GTA	Registered person	5% (without ITC) or 12% (with ITC)
2.	Legal services by an individual advocate, including a senior advocate or firm of advocates	Advocate or firm of advocates	Any business entity located in taxable territory	Applicable GST rate
3.	Services supplied by an arbitral tribunal	Arbitral tribunal	Any business entity located in taxable territory	Applicable GST rate
4.	Sponsorship services	Any person	Any body corporate or partnership firm	Applicable GST rate
5.	Services provided by the Central or State Government, Union territory, or local authority to a business entity (excluding certain services)	Government or local authority	Any business entity located in taxable territory	Applicable GST rate
6.	Services by a director of a company or a body corporate	Director	Company or body corporate	Applicable GST rate
7.	Services by an insurance agent	Insurance agent	Any person carrying on insurance business	Applicable GST rate
8.	Services by a recovery agent	Recovery agent	Banking company or financial institution or NBFC	Applicable GST rate
9.	Transportation of goods by a vessel from a place outside India up to the customs station of clearance in India	Person located in non-taxable territory	Importer as defined under Customs Act	Applicable GST rate
10.	Transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Indian Copyright Act, 1957	Author, music composer, photographer, artist, etc.	Publisher, music company, producer	Applicable GST rate
11.	Supply of services by a member of an overseeing committee to Reserve Bank of India	Member of overseeing committee	Reserve Bank of India	Applicable GST rate
12.	Services provided by business facilitator (BF) to a banking company	Business facilitator	Banking company	Applicable GST rate
13.	Services provided by an agent of business correspondent (BC) to business correspondent	Agent of business correspondent	Business correspondent	Applicable GST rate
14.	Security services (services provided by way of supply of security personnel) provided to a registered person (excluding certain entities)	Any person other than a body corporate	Registered person	Applicable GST rate
15.	Services provided by way of renting of a motor vehicle provided to a body corporate (with certain conditions)	Any person other than a body corporate, paying central tax at the rate of 2.5% on renting of motor vehicles with input tax credit only of input service in the same line of business	Body corporate	Applicable GST rate
16.	Services of lending of securities under Securities Lending Scheme, 1997 of SEBI	Lender (a person who deposits the securities registered in his name or in the name of any other person duly authorized on his behalf with an approved intermediary for the purpose of lending under the Scheme)	Borrower (a person who borrows the securities under the Scheme through an approved intermediary of SEBI)	Applicable GST rate
17.	Services supplied by individual Direct Selling Agents (DSAs)other than a body corporate, partnership or limited liability partnership firmto bank or non-banking financial company (NBFCs)	Individual Direct Selling Agents (DSAs)other than a body corporate, partnership or limited liability partnership firm	A banking company or a non-banking financial company, located in the taxable territory	Applicable GST rate
18.	Servicessupplied by the Central Government,State Government, Union territory or local authority by way of renting of immovable property to aperson registered underthe Central Goods and Services Tax Act, 2017(12 of 2017)	Central Government,State Government, Union territory or local authority	Any person registered underthe Central Goods and Services Tax Act, 2017	Applicable GST rate
19.	Services supplied by any person by way of transfer of development rights or Floor Space Index(FSI)(including additional FSI)for construction of a project by a promoter	Any person	Promoter	Applicable GST rate
20.	Long-term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter	Any person	Promoter	Applicable GST rate
21.	Service by way of renting of any property other than residential dwelling	Any unregistered person	Any registered person (other than a person who has opted to pay tax under composition levy)	Applicable GST rate

Notes:

The term "agriculturist" refers to an individual or Hindu Undivided Family who undertakes cultivation of land by own labour or by the labour of family or by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.
The GST rates mentioned are subject to change as per the latest notifications issued by the government.
For certain services like GTA, the recipient has the option to pay GST at 12% with full Input Tax Credit (ITC) or 5% with no ITC.
This table is based on the provisions as of February 13, 2025. For the most current information, please refer to the latest notifications and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC).

A thorough understanding of the Reverse Charge Mechanism is vital for businesses to fulfill their GST obligations effectively. By adhering to the prescribed RCM provisions, organizations can maintain seamless tax compliance and avoid unnecessary financial liabilities. However, as GST regulations continue to evolve, staying updated with the latest CBIC notifications is imperative. This document serves as a helpful reference, but for the most current legal and procedural updates, businesses should always verify details on the CBIC portal.

Disclaimer:

The views expressed in this article are those of the author and should not be considered as professional advice or opinion. We strongly recommend that readers seek professional advice before arriving at any decision or conclusion based on the content of this article. We shall not be held responsible for any loss or damage incurred by anyone relying on the information provided herein. The above views are based on our understanding of the provisions and should be independently verified for accuracy

The author can be reached at office.bhavikco@gmail.com