Reverse Charge Mechanism - cargo
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Reverse Charge Mechanism

Reverse Charge Mechanism


Reverse Charge Mechanism (RCM) basically means that the recipient of Goods / Services will make payment of GST and deposit to the Government and not the supplier of Goods/ Services.

Under the normal mechanism of levy of GST, the receiver of goods/services pays the GST to the supplier of goods/ services and such supplier then deposits the GST with the Government (after taking the benefit of an input tax credit).

ITC is the credit that a taxpayer can claim if he has already paid taxes on the input.

Input Tax Credit under RCM

A supplier/seller cannot take an Input Tax Credit of GST paid on goods & services supplied under the reverse charge mechanism. 

The buyer/recipient can avail of ITC on GST amount paid under reverse charge on receipt of goods or services. Only, if such goods or services can be used for business purposes. 

The ITC cannot be used by the recipient towards payment of output GST on goods or services under reverse charge. One can make payment of GST under reverse charge only in cash. The ITC on reverse charge is recoverable under Table 4(3) in the electronic ledger only.

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