Normally the seller charges GST and pays it to the government. Under reverse charge the buyer pays it. The law lists the supplies where this applies, so a business needs to know which of its purchases fall in that list.
Common cases
As of October 2026, examples notified under section 9(3) of the CGST Act include:
- goods transport agency services, unless the transporter has opted to charge GST itself;
- legal services from an advocate to a business;
- sponsorship services and services from a company director;
- security services from a supplier other than a company;
- metal scrap sold by a registered seller to a registered buyer, from 10 October 2024.
Section 9(4) separately covers some purchases from unregistered suppliers, such as certain buys by real estate promoters.
How it works in practice
The buyer pays the tax in cash through GSTR-3B; it cannot be paid from existing credit. Once paid, the same amount can usually be claimed back as input tax credit. When the supplier is unregistered, the buyer issues a self-invoice. The seller's invoice must say that tax is payable on reverse charge.
The usual mistake is forgetting it on transport bills and lawyers' fees, which surfaces as interest at year end.