Normally the seller collects and pays GST. Under the Reverse Charge Mechanism (RCM), that flips — the buyer pays the GST directly to the government. If it applies to you and you miss it, it's a compliance gap.
When RCM applies
- On certain notified goods and services.
- On some purchases from unregistered suppliers (in specified cases).
- On specific services like goods transport, legal services, and imports of services.
What the buyer must do
Under RCM you must pay the GST yourself (in cash, not from ITC), and only then can you claim the corresponding input credit if eligible. It has to be reported correctly in your returns.
Why it catches people out
Businesses forget that some ordinary-looking expenses trigger RCM. Since the liability is on you as the buyer, ignorance doesn't help — it just becomes a demand later.
Know which of your expenses attract RCM, pay the tax, report it, and claim eligible credit. When in doubt on a specific expense, check before you file.
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This article is for general information based on rules current at the time of writing and is not professional advice. Rules change — confirm specifics with a GovYapar expert before acting.
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