Navigating the Reverse Charge Mechanism (RCM): Tax Rules for Unregistered Vendors

Understanding Reverse Charge Obligations

Under standard GST, the supplier collects tax from the buyer and deposits it with the government. Under the Reverse Charge Mechanism (RCM), the statutory liability to pay GST shifts directly to the recipient.

Key Scenarios Requiring RCM Compliance

• Services received from Goods Transport Agencies (GTA).
• Legal services rendered by individual advocates or senior counsels.
• Director remuneration and sitting fees.
• Procurements from unregistered suppliers under notified categories (Section 9(4)).

Automating Self-Invoices and Payment Vouchers

Recipients must issue a 'Self-Invoice' under Section 31(3)(f) and a 'Payment Voucher' under Section 31(3)(g) when making RCM payments. Relaso GST Invoicing flags RCM line items automatically, generates compliant self-invoices, and posts offsetting liability and ITC entries to the accounting ledger in real time.