When is the Reverse Charge Mechanism applicable under GST?

By Sakshi Shah on February 27, 2020

Reverse Charge Mechanism i.e. RCM is the mechanism under which the buyer is liable to pay GST to the government instead of seller. Further, it is applicable on sale of notified goods and services or specified situations.

What is Reverse Charge Mechanism (RCM) under GST?

RCM is applicable in the following situations:

A. Purchase from Unregistered Dealer

If a person buys goods or services from an unregistered dealer and the value exceeds Rs.5000 in a day, such buyer must pay tax under reverse charge mechanism.

The above provision is not applicable in case of government entities who are registered as TDS Deductors under GST.

B. Purchase of Notified Goods and Services

CBEC has notified a list of goods and services on which RCM is applicable. As a result, if a person buys goods or services mentioned in this notified list, he is liable to pay GST under RCM.

Notified List of Goods under RCM

Cashew nuts not shelled or peeledAgriculturist Any registered person
Bidi wrapper leaves (tendu)Agriculturist Any registered person
Tobacco leavesAgriculturist Any registered person
Silk yarn Manufacturer of silk yarn from raw silk or silk worm cocoonsAny registered person
Raw cottonAgriculturist Any registered person
Supply of lotteryState Government / Union Territory / Local AuthorityLottery distributor or selling agent
Used vehicles / seized and confiscated goods / old and used goods / waste and scrapCentral Government / State Government / Union Territory / Local AuthorityAny registered person

Notified List of Services under RCM