Reverse Charge Mechanism (RCM)
Definition
The Indian GST provision making the recipient, rather than the supplier, liable to pay tax on specified supplies, including certain services such as legal and goods transport agency services, and purchases from unregistered suppliers. The recipient pays in cash and may then claim input tax credit subject to the usual conditions.
Related Terms in India GST
Zero-Rated Supply
A supply taxed at zero per cent where the supplier may still reclaim input tax, in India covering exports and supplies to Special Economic Zones. Zero-rating preserves input credit, which is what distinguishes it from an exempt supply.
Exempt Supply
A supply on which no GST is charged and for which related input tax credit cannot be claimed. Because credit is blocked, embedded tax becomes a cost, making exemption materially different from zero-rating.
Composition Scheme
A simplified GST option for smaller Indian taxpayers that substitutes a flat rate on turnover for normal rate-wise tax, with reduced filing. Participants cannot collect GST from customers or claim input tax credit, and eligibility turnover limits and rates are set by the GST Council.
Place of Supply
The rule determining where a supply is treated as made, which decides whether CGST and SGST or IGST applies. It turns on goods movement or, for services, on recipient location and specific rules for immovable property, events, transport and digital services. Getting it wrong produces tax paid under the wrong head.
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