What is the Reverse Charge Mechanism (RCM) under GST?

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By Sakshi Shah on February 18, 2019

Under any tax regime, a seller is liable to pay tax to the government. In GST, the supplier of goods or services collects GST from the buyer and pays it to the GST department while filing the GST Return. Under Reverse Charge Mechanism i.e. RCM, the buyer is liable to pay GST to the government. It is applicable on sale of notified goods and services or specified situations.

When is the Reverse Charge Mechanism applicable under GST?

Normal Mechanism

  • The seller collects payment from the buyer for the sale of goods or services
  • He collects tax (GST) from the buyer for the sale of goods or services
  • He pays tax (GST) to the government while filing his GST Return
GST under Normal mechanism

Reverse Charge Mechanism (RCM)

  • The seller collects payment from the buyer for the sale of goods or services
  • He does not collect tax (GST) from the buyer for the sale of goods or services
  • The buyer pays tax (GST) to the government while filing his GST Return
GST under Reverse Charge Mechanism

FAQs

1. How can a buyer pay GST under reverse charge if he is not registered under GST?

If a person is required to pay GST as per the provisions of the reverse charge mechanism, it is compulsory to take registration irrespective of the turnover. The threshold limit of Rs.20 lacs is not applicable in these cases.

2. Can I claim Input Tax Credit of the tax paid under the Reverse Charge Mechanism?

If the buyer has paid GST under reverse charge, he can claim the input tax credit of the tax paid provided all the conditions to claim ITC are satisfied. It must be noted that the input tax credit can be claimed by the buyer and not seller.
[When can I claim Input Tax Credit under GST?]