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Reverse charge under GST shifts the duty to pay tax from the supplier to the recipient, but only for supplies covered by an operative notification and its conditions. A small business should therefore screen each inward purchase against the current notification, document the decision, determine the correct time and place of supply, pay and report any liability, and assess input tax credit separately.
This checklist is designed for Indian businesses reviewing purchases. It is a control workflow, not a universal list of reverse-charge transactions. The exact result depends on the supply, supplier and recipient status, location facts, value, rate and the notification in force for the relevant period.
What reverse charge means in GST
CBIC’s Sectoral FAQ defines reverse charge as follows: “It means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.” In an ordinary taxable sale, the supplier charges GST and remits it. Under reverse charge mechanism (RCM), the recipient becomes responsible for the tax on a notified supply.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallRCM is not a blanket rule for every purchase from an unregistered person. Sections 9(3) and 9(4) of the CGST Act provide the statutory framework, while notifications identify categories, recipient classes and conditions. The corresponding State GST, Union territory GST or IGST provisions must also be applied according to whether the supply is intra-State or inter-State.
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Because notifications and amendments change, a generic internet list can be obsolete. The legally relevant question is whether the actual supply, parties and place-of-supply facts fit an entry that is operative for the tax period under review.
The seven-part RCM compliance workflow
1. Screen the purchase against the current notification
Start with the transaction itself, not the supplier’s registration status. Write a plain-language description of what was received and classify it as accurately as the available documents allow. Then identify the supplier’s registration status and legal type, your own recipient category, and the location facts that determine whether the supply is intra-State or inter-State.
Check the current CBIC notification and amendment history for an entry that covers the supply. Read every condition in the entry: some apply only to a specified supplier, recipient, service or circumstance. Confirm the effective date before assigning liability. The CBIC notification index is useful for locating amendments, but an index by itself does not decide an unspecified transaction.
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- Supply: the actual goods or service, including its classification and whether it is a composite or mixed supply where relevant.
- Supplier: legal identity, registration status on the relevant date and any category specified by the notification.
- Recipient: your registration and business status, and whether you fall within the notified recipient class.
- Location: supplier location, recipient location, place of supply and the intra-State or inter-State result.
- Notification: entry number, conditions, effective date and any amendment that changes scope or rate.
Do not treat “supplier is unregistered” as the conclusion. It is only one fact that may matter under a particular statutory provision or notification.
2. Record why the transaction is, or is not, under RCM
Make a determination record for every transaction that reaches your review threshold, including transactions you conclude are outside RCM. The record should be understandable to someone who did not make the original decision.
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- Supplier name, address and GST registration details, if any.
- Purchase order, contract, invoice or other supporting document.
- Plain-language description and classification of the supply.
- Supplier and recipient categories, including registration status on the relevant date.
- Relevant place-of-supply and intra-State or inter-State facts.
- Notification entry checked, conditions applied and effective date.
- Taxable value, applicable rate, tax components and calculation.
- Conclusion: RCM applies, RCM does not apply, or the case requires specialist review.
- Names or roles of the reviewer and approver, plus the review date.
Registered-person accounting rules require records of tax payable under sections 9(3) and 9(4), tax collected and paid, input tax and input tax credit claimed. Your accounting system should therefore preserve the RCM decision with the purchase entry rather than keeping the reasoning only in email.
3. Check invoice and payment-voucher duties
An invoice for a supply covered by reverse charge should indicate that tax is payable under reverse charge. Verify that the document contains the information required for the applicable supply and that the accounting entry identifies the RCM nature.
In specified cases where the recipient is liable under section 9(3) or 9(4) and receives goods or services from a supplier who is unregistered on the date of receipt, section 31(3)(f) of the CGST Act requires the registered recipient to issue an invoice. The provision states: “a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both”. The Act also requires a payment voucher when payment is made in the circumstances covered by the applicable provision.
Apply the statutory conditions rather than issuing recipient invoices automatically for every unregistered purchase. Check the corresponding State GST or IGST requirements and retain evidence of the receipt date, because the supplier’s status on that date can be material.
4. Determine the time of supply and tax period
The supplier’s invoice date is not automatically the RCM tax date. Work through the statutory time-of-supply rule for the particular goods or services and record the dates needed for that analysis.
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- Date the goods or services were received.
- Date of the supplier’s invoice or other prescribed document.
- Date your business made payment.
- Any other date required by the applicable goods or services rule, amendment or notification.
Use those facts to identify the period in which the liability belongs. CBIC’s FAQ describes the familiar timing framework, but the CGST Act, amendments and transaction facts control when they differ. A monthly close should include a search for received services or goods for which an invoice or payment was recorded later.
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Once applicability and time of supply are established, calculate tax on the taxable value using the rate that applies to the notified entry. The basic calculation is:
RCM tax = taxable value × applicable GST rate
Split the result into CGST and SGST/UTGST for an intra-State supply, or IGST for an inter-State supply, according to the place-of-supply determination. Do not assume a rate from an old checklist; rates and conditions can be amended.
The following is an arithmetic illustration only, not a statement of the rate for any particular service or goods category:
| Item | Illustrative value | Illustrative rate | Illustrative tax | How to use it |
|---|---|---|---|---|
| Notified inward supply | ₹100,000 | 18% | ₹18,000 | Replace the rate and value with the operative notification and transaction figures. |
| Intra-State split | ₹100,000 | 9% CGST + 9% SGST | ₹9,000 CGST + ₹9,000 SGST | Only where the supply is intra-State and those rates apply. |
| Inter-State treatment | ₹100,000 | 18% IGST | ₹18,000 IGST | Only where the place-of-supply rules produce an inter-State supply and the rate applies. |
Keep the calculation linked to the source invoice, valuation basis and notification entry. If consideration is not straightforward, obtain advice before finalising the taxable value.
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6. Pay and report the liability in the return period
Include identified RCM supplies in the tax-payment and return workflow for the period established under the time-of-supply rules. Reconcile the transaction register to the inward-supply reverse-charge section of GSTR-3B before filing.
Use the live GST portal form and current filing instructions for the relevant tax period. A historical GSTR-3B form can show the general return structure, but it is not proof of the current portal layout or validation rules. Have a reviewer compare:
- the RCM register total with the amount entered in the appropriate GSTR-3B inward RCM field;
- CGST, SGST/UTGST and IGST components with the ledger balances;
- the tax period with the time-of-supply worksheet;
- payment records with the liability reported; and
- any correction or reversal from an earlier period with the supporting adjustment note.
Do not let a missing supplier invoice or a late document silently defer an already-established recipient liability. Investigate the dates and the applicable rule instead.
7. Assess input tax credit separately
Paying GST under RCM does not automatically create an input tax credit. Treat liability and credit as two separate decisions.
Before claiming ITC, verify the statutory eligibility conditions, possession of required documentation, actual receipt of the goods or services, payment of the tax, business use and any blocked-credit or apportionment rule. CBIC’s FAQ confirms that tax paid under reverse charge can be input tax, subject to the applicable law. A transaction may therefore require RCM payment but yield no credit, only partial credit or credit that must later be reversed.
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Keep the RCM tax payment, recipient invoice or payment voucher where required, purchase evidence and ITC calculation together. The person approving the credit should be able to trace it back to the original RCM determination.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to compare two purchases without overgeneralising
When two inward purchases appear similar, compare them on every axis below. A difference on one axis can change the result.
| Comparison axis | Questions to answer | Why it matters |
|---|---|---|
| Supply type and classification | What exactly was supplied, and is the classification supported by the documents? | Notifications attach to specified goods, services or descriptions. |
| Supplier status | Was the supplier registered on the relevant date, and does its category match the entry? | Some rules depend on supplier status or type at receipt. |
| Recipient class | Does the recipient fall within the notified class? | The same supply can be treated differently for different recipients. |
| Location and movement | What are the supplier and recipient locations and the place of supply? | This determines intra-State versus inter-State treatment and the tax component. |
| Notification and conditions | Which operative entry applies, from what date, and with what exceptions? | An old list may omit an amendment or condition. |
| Value and rate | What is the taxable value and the rate for this entry and period? | The liability calculation depends on both. |
| Timing | When did receipt, invoicing and payment occur? | These dates identify the correct return period. |
| ITC | Is credit eligible, restricted, apportioned or blocked? | Credit entitlement is not guaranteed by RCM payment. |
Worked decision examples
Example: a purchase that matches a notified entry
A registered business receives a service from a supplier whose status and category satisfy a current RCM notification. The business documents the service, confirms its place of supply, records receipt, invoice and payment dates, and calculates tax at the notified rate. It issues a recipient invoice or payment voucher only where the statutory conditions require one, reports the liability in the relevant GSTR-3B period and then tests ITC eligibility independently.
Example: an unregistered-supplier purchase outside the notified scope
The same business buys an item from an unregistered supplier, but the item, recipient and circumstances do not fit an operative RCM entry. The purchase still needs normal accounting and supporting documentation, but the business should not create an RCM liability merely because the supplier is unregistered. Record the reason for the conclusion so that the decision can be revisited if the facts or law change.
Common failure points and corrective actions
- Using a generic “RCM list”. Replace it with a dated check of the operative notification and amendments.
- Assuming every unregistered purchase attracts RCM. Test the supply, parties and conditions; unregistered status alone is not enough.
- Ignoring place-of-supply facts. Capture locations and determine intra-State or inter-State treatment before splitting tax.
- Using the supplier invoice date automatically. Apply the statutory time-of-supply rule and retain receipt and payment dates.
- Reporting tax but not maintaining a calculation trail. Link the return amount to the invoice, value, rate and notification entry.
- Claiming ITC as an automatic consequence. Run a separate eligibility, business-use and restriction check.
- Relying on an old portal screenshot. Follow the live GST portal labels and filing instructions for the current period.
- Failing to document an “RCM not applicable” conclusion. A negative determination should show what was checked and why.
A practical monthly control checklist
- Export or review all inward purchases, including services received without a conventional supplier tax invoice.
- Filter for supplier, supply and recipient characteristics that could match notified RCM categories.
- Check each candidate against the notification effective for the relevant date.
- Complete the determination record and escalate unusual classifications.
- Capture receipt, invoice and payment dates and assign the correct tax period.
- Prepare recipient invoices or payment vouchers where the statutory conditions apply.
- Calculate CGST, SGST/UTGST or IGST using the applicable value and rate.
- Post the liability to the accounting records and reconcile it to GSTR-3B before filing.
- Review ITC eligibility separately and document any restriction, apportionment or reversal.
- Retain the complete audit trail with the purchase and note any later correction.
When to obtain specialist advice
Ask a GST practitioner or chartered accountant to review a transaction when classification is uncertain, several locations are involved, the notification has complex conditions, the supplier’s status changed around receipt, valuation is disputed, or an earlier period may need correction. The exact notified categories, recipient conditions and rates cannot be settled without the actual transaction facts and the notification in force.
CBIC materials and return instructions should be checked again whenever GST amendments, notifications or portal forms change. Materials available on October 13, 2026 provide the framework for this checklist; they do not determine every business’s future transactions.
The Bottom Line
For each inward purchase, prove whether an operative notification transfers liability to you, document the dates and calculation, report the amount in the correct GSTR-3B period, and test ITC under its own statutory conditions. That sequence prevents both missed RCM liabilities and unsupported credit claims.
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