Reverse Charge Mechanism (RCM)

Under normal GST, the supplier charges tax and remits it to the government. Under reverse charge mechanism (RCM), the recipient pays the GST directly. This applies to specific categories of services and transactions defined under Section 9(3) and 9(4) of the CGST Act.

Services commonly under RCM include: legal services by individual advocates, sponsorship services, services by a director to the company, security services by individual providers, and goods transport agency (GTA) services. If you're a freelance lawyer or provide security services, your invoices look different — you don't charge GST; the client self-assesses and pays it.

For freelancers receiving services under RCM (e.g., you hire a lawyer or use a GTA), you need to self-assess the GST, pay it via your GSTR-3B return, and then claim it as input tax credit in the same return. The net effect is often zero, but the paperwork must be done correctly.

Your invoice must state whether reverse charge applies. If RCM is applicable, include the text: "Tax payable under reverse charge" on the invoice. The recipient (your client) is then responsible for discharging the GST liability.

Most standard freelance services (IT, design, consulting, marketing) are NOT under RCM. You charge GST normally. RCM is relevant mainly when dealing with specific service categories or when purchasing from unregistered suppliers above certain thresholds.