GST RCM cheatsheet — the 8 most common reverse-charge triggers

RCM 101 — what it actually is

Under regular GST (Sec 9(1)), the supplier collects tax from the buyer and remits it. Under reverse charge (Sec 9(3) and Sec 9(4)), the buyer pays the tax directly to the government — no supplier collection, no supplier invoice with GST on it. The buyer then claims ITC on what they paid (subject to the usual Sec 17 conditions).

Two flavors:

• Sec 9(3) — Specified supplies: CBIC notifies specific categories of goods and services where RCM always applies, regardless of supplier registration. This is the bulk of real-world RCM.
• Sec 9(4) — Unregistered supplier: Re-activated for real estate from 1-April-2019 (Notification 7/2019-CT(R)), and conditionally for promoters who buy from unregistered persons. For everyone else, Sec 9(4) is dormant.

The 8 most common Sec 9(3) triggers

1. Goods Transport Agency (GTA) — road transport

If a GTA charges you for road transport of goods (with a consignment note) and has not opted for forward charge at 12% with ITC, RCM applies. The buyer pays:

• 5% GST (no ITC for the GTA's side — but the buyer can claim ITC on this RCM 5% in their own books)

Common confusion: courier services (Bluedart, Delhivery) are not GTAs — they file regular forward-charge GST at 18%. Only LR-issuing transporters fit the GTA definition.

2. Advocate / legal fees from individual advocate or firm

Services by an individual advocate (including senior advocates) or partnership firm of advocates to a business entity. 18% GST under RCM, fully ITC-eligible.

Excludes: legal services to non-business entities (individuals, family trusts, charities not registered for business). Includes: every retainer fee, court fees, drafting fees, opinion-letter fees from your in-house legal counsel.

3. Director sitting fees / commission

Remuneration to a director by a body corporate (other than salary to an executive director under Sec 192 of Income Tax Act, where TDS already runs). 18% GST under RCM, fully ITC-eligible by the company.

Sub-traps:

• If the director is also an employee (executive director / managing director) and the payment is salary, no RCM — it's outside GST scope.
• Sitting fees, professional fees to non-executive directors, commission to directors — all under RCM.
• Most companies miss this in months when there's an extra board meeting. The audit clause is 16(a) of Form 3CD.

4. Sponsorship services to body corporate

If a sponsorship recipient is a body corporate or partnership firm, the body corporate pays the GST on RCM. 18%, fully ITC-eligible.

Practical example: your company sponsors a startup conference and pays ₹2 L to the organizer. Organizer doesn't charge you GST. You self-invoice and pay ₹36,000 IGST under RCM, claim it as input.

5. Security agency services (man-power security)

If a non-corporate security agency provides services to a body corporate (registered or otherwise), 18% GST under RCM. The legislative intent here is anti-evasion — many small security agencies were under-reporting.

Exclusion: if the security agency is itself a body corporate (a private limited company or LLP), forward charge applies — the agency charges GST on its bill.

6. Import of services from outside India

Any service imported from a non-resident (Google, AWS, Stripe, SaaS subscriptions, ad spend to Facebook / LinkedIn). 18% IGST under RCM, fully ITC-eligible.

This is the most under-reported RCM category. Every founder paying for Notion, Linear, Figma, Cloudflare, AWS, Vercel, Mailchimp, Calendly — even small subscriptions — owes 18% IGST monthly. The fix: a single Excel tracker of subscriptions and a monthly self-invoice batch.

7. Real estate — Sec 9(3) specific notifications + Sec 9(4) re-activation

Real estate has its own RCM ecosystem under Notification 7/2019-CT(R):

• Construction services to promoter from unregistered supplier: Sec 9(4) re-activated; promoter pays 18% RCM.
• Affordable housing rate: 1.5% effective (1% net of ITC restrictions).
• Non-affordable residential: 7.5% effective (5% net).
• Construction inputs from registered suppliers: RCM applies if 80% threshold of inputs from registered suppliers isn't met (the "80-20 rule").

For non-real-estate businesses, Sec 9(4) is dormant. You can buy from any unregistered supplier and pay no RCM (the famous "₹5,000/day threshold" was deleted in 2017).

8. Insurance agent / recovery agent commission

Commission to a non-corporate insurance agent (by an insurance company), or recovery agent (by a bank / NBFC). 18% under RCM, paid by the insurance company / bank.

This rarely affects normal businesses but is critical for the financial-services sector.

The self-invoice format (Sec 31(3)(g))

When you pay RCM on an inward supply from an unregistered supplier (e.g. all import-of-service cases, Sec 9(4) real estate cases), you must issue a self-invoice on your own letterhead. It looks like a regular tax invoice but with:

• Supplier: name and address of the unregistered supplier (no GSTIN)
• Recipient: your own details with GSTIN
• "Reverse Charge: Yes" prominently marked
• HSN/SAC, description, value, IGST/CGST/SGST breakup
• "Tax payable under Reverse Charge — Section 9(3) / 9(4)" stamp

Self-invoices must be issued at the time of receipt of the supply (or earliest of payment date, invoice receipt date). They're reported in GSTR-1 Table 13 and GSTR-3B Table 3.1(d). Maintain a separate self-invoice series.

ITC on RCM-paid tax

Once you've paid the RCM amount via your electronic cash ledger (it cannot be set off against existing input balance), you become eligible to claim the same amount as ITC in the same month. This is one of the few cases where the cash payment and the ITC claim happen in the same return.

Watch out: ITC eligibility under Sec 17 still applies. If the input service is for personal consumption, exempt supplies, or motor vehicles outside the exception list, you pay RCM but don't get ITC. Net cost = full tax. Example: legal services for a personal matter routed through the company — RCM is owed by the company, ITC is denied because it's not a business supply.

Audit-side gotchas

Three issues we routinely flag in clients' GST audits (GSTR-9C exercises):

1. Director sitting fees not RCM'd in the month of payment — caught when comparing TDS u/s 194J entries to the GST RCM register.
2. SaaS subscriptions paid via founder's credit card — RCM owed by the company, but no self-invoice was raised because the transaction was sitting in the founder's personal account, not the company's bank.
3. Single GTA invoice spanning multiple shipments — RCM applies to the entire freight value, not netted against any reverse freight.

The Finclar take

RCM is the most under-administered slice of GST compliance. We see businesses doing ₹50 Cr - ₹200 Cr turnover that have never raised a single self-invoice. The fix is procedural, not legal — you don't need clever planning, you need a monthly checklist. Our recommendation is a 5-row Excel ledger updated on the 1st of every month:

1. GTA invoices received? Sum freight × 5%.
2. Legal fee invoices? Sum × 18%.
3. Director payments other than salary? Sum × 18%.
4. Foreign SaaS / ads / SaaS subscriptions? Sum × 18%.
5. Anything else from the Sec 9(3) list? Sum × applicable rate.

Add all five, file under Table 3.1(d) of GSTR-3B, pay via cash ledger, claim as ITC in Table 4(A)(3). Total exposure: 10 minutes a month, full RCM clean.