Normal GST vs reverse charge
Under the normal (forward charge) mechanism, the supplier collects GST from the buyer and deposits it with the government. Under Reverse Charge Mechanism (RCM), that responsibility flips — the recipient of the goods or services calculates, pays, and deposits the GST directly, even though they're the buyer, not the seller.
The tax calculation itself doesn't change — it's still value of supply × GST rate — only who is legally responsible for paying it to the government changes.
When RCM applies
RCM applies to specific categories notified by the government, not to transactions in general. Common examples include certain services received from a Goods Transport Agency (GTA), legal services from an advocate or firm of advocates, services from a director to their company, and certain imports of services. It can also apply to purchases from unregistered dealers in specific notified categories.
If your transaction isn't in a notified RCM category, the normal forward-charge mechanism applies as usual — RCM is the exception, not the default.
A worked example
A company receives ₹1,00,000 of legal services from a firm of advocates (a notified RCM category) with GST at 18%. Under RCM, the company itself calculates ₹1,00,000 × 18% = ₹18,000 as GST payable, and deposits it directly with the government — the advocate's firm doesn't charge or collect this GST on their invoice.
Why RCM exists
RCM shifts compliance burden to the recipient in situations where it's impractical or risky to rely on the supplier — for example, an unregistered supplier isn't set up to collect and deposit GST at all, and shifting the liability to a registered recipient (who's already in the GST system) ensures the tax still gets collected.
Input tax credit under RCM
A registered recipient who pays GST under RCM can generally claim input tax credit (ITC) for that GST, provided the goods or services are used for business purposes — meaning RCM often nets out to no additional cost for a fully taxable business, since the tax paid can be claimed back, though the cash flow timing (pay now, claim credit when filing) still matters.