RCM Calculator

What is Reverse Charge Mechanism (RCM)?

Reverse Charge Mechanism (RCM) is a provision under GST where the recipient of goods or services is liable to pay tax directly to the government instead of the supplier. Under normal GST, the supplier collects tax from the buyer and remits it. Under reverse charge, this responsibility shifts entirely to the recipient.

RCM is governed by two key sections of the CGST Act. Section 9(3) covers notified categories of goods and services where RCM always applies, regardless of the supplier's registration status. Section 9(4) covers supplies received from unregistered dealers by registered recipients in specified categories.

• The recipient pays GST directly to the government through the electronic cash ledger, not to the supplier
• The recipient must issue a self-invoice for the supply received under RCM
• GST paid under RCM is eligible for input tax credit if used for taxable outward supplies
• RCM liability must be discharged through the cash ledger only, not through ITC adjustment

How is RCM Calculated?

Calculating GST under reverse charge follows the same rate structure as forward charge. The key difference is that the recipient applies the applicable GST rate to the taxable value of the supply received, rather than the supplier doing so on the invoice.

For intra-state supply (supplier and recipient in the same state), the total GST is split equally between CGST and SGST. For inter-state supply (different states or imports), the entire amount is charged as IGST.

The taxable value for RCM is the transaction value of the supply. If the supplier is unregistered and does not issue an invoice, the recipient must determine the value based on the open market value or the value of like goods/services. The GST Invoice Value Calculator can help verify the final invoice amount including tax.

RCM Calculation Example

Here is a worked example for a legal service received from an advocate, which is a notified service under Section 9(3) of the CGST Act.

The recipient pays Rs 36,000 through the electronic cash ledger while filing GSTR-3B and can claim the same Rs 36,000 as input tax credit in the same return period, provided the service is used for making taxable outward supplies.

Goods and Services Under RCM

The CBIC has notified specific categories of goods and services that attract GST under reverse charge. Here are the most common ones that businesses encounter regularly:

For restaurant and food service businesses, GTA services for transporting raw materials and security guard services are the most common RCM scenarios. Use the HSN Code Finder to look up the correct classification and rate for specific goods received under reverse charge.

Input Tax Credit on RCM

One of the key benefits of paying GST under reverse charge is that the recipient can claim input tax credit on the tax paid. This means the RCM liability is essentially a cash flow impact rather than a net cost for businesses that make taxable outward supplies.

• Same-period ITC: ITC on RCM can be claimed in the same month's GSTR-3B return in which the tax is paid. There is no waiting period.
• Cash ledger only: RCM tax must be paid through the electronic cash ledger. You cannot use existing ITC balance to pay RCM liability.
• Self-invoice required: To claim ITC, you must issue a self-invoice for the supply received. Without the self-invoice, ITC cannot be claimed.
• Composition dealers: Dealers under the composition scheme must pay RCM but cannot claim ITC. The tax paid becomes part of their input cost.

How to Use This RCM Calculator

This calculator gives you instant GST figures for any reverse charge transaction. Follow these steps:

• Step 1: Enter the taxable value of the goods or services received under reverse charge. This is the transaction value before GST.
• Step 2: Select the applicable GST rate (5%, 12%, 18%, or 28%). Use the GST Rate Finder if you are unsure about the applicable rate for your supply.
• Step 3: Choose the supply type. Select "Intra-State" if both supplier and recipient are in the same state, which splits GST into CGST and SGST. Select "Inter-State" for supplies between different states or imports, which applies IGST.
• Step 4: Click "Calculate RCM" to see the full breakup of CGST, SGST, or IGST, total GST under RCM, and total amount payable including tax.

For verifying your GSTIN details or checking the registration status of your supplier, use the GSTIN Verification tool alongside this calculator.