Reverse Charge Mechanism (RCM) is a mechanism under GST where the recipient of goods or services is liable to pay GST to the government, instead of the supplier. In normal cases, it is the supplier who collects the GST from the recipient and pays it to the government. However, in certain cases, the recipient is responsible for paying the GST directly to the government under RCM.
Under the RCM, the recipient of goods or services is required to self-invoice for the purchases made and pay the applicable GST on them to the government. This mechanism is applicable in cases where the supplier is either not registered under GST or is a composition dealer. It is also applicable in cases where the supplier is registered under GST but the value of the supplies made to the recipient is below the threshold limit of Rs. 20 lakhs.
The RCM is applicable to both goods and services, and the rates of GST applicable are the same as those under the regular mechanism. However, certain goods and services are exempt from RCM. The list of goods and services that are exempt from RCM is determined by the GST Council and is subject to change from time to time.
