Normally the seller charges GST and pays it to the government. Under reverse charge, the buyer pays it. The supplier's invoice shows no tax, and you, as the registered buyer, work out the GST, pay it in cash and then claim it as credit where allowed.
Reverse charge applies only where the law says so. Section 9(3) of the CGST Act lets the government notify goods and services for it, and section 5(3) of the IGST Act does the same for inter-state supplies.
01Common services under reverse charge
| Service | Supplier | Buyer who pays |
|---|---|---|
| Goods transport by a GTA | A goods transport agency that has not chosen to charge GST itself | Factories, companies, firms, societies, registered persons and some others |
| Legal services | An advocate or firm of advocates | A business entity |
| Arbitration | An arbitral tribunal | A business entity |
| Sponsorship | Any person | A company or partnership firm |
| Director services | A director | The company |
| Security services | Anyone other than a company | A registered person, with some exceptions |
| Renting of commercial property | An unregistered landlord | A registered person, other than a composition dealer |
| Services from outside India | A supplier abroad | The business in India |
| Insurance agent services | An insurance agent | An insurance company |
| Recovery agent services | A recovery agent | A bank or NBFC |
The list is longer and has detailed conditions for each entry. Notification 13/2017-Central Tax (Rate), as amended, is the source, as of October 2026.
02Goods under reverse charge
Fewer goods are covered. They include raw cotton bought from an agriculturist, cashew nuts not shelled or peeled, tendu leaves, silk yarn from a manufacturer, and, from 10 October 2024, metal scrap sold by an unregistered person to a registered buyer.
03Worked examples
Legal fees
An Ahmedabad private limited company pays an advocate ₹50,000 for drafting a contract. The advocate's bill carries no GST. The company:
- Pays GST of ₹9,000 (18%) in cash: ₹4,500 CGST and ₹4,500 SGST, since the advocate is in Gujarat.
- Shows it in Table 3.1(d) of GSTR-3B.
- Claims ₹9,000 as input tax credit in Table 4A(3) of the same return.
The net cost is nil if the credit is usable, but the cash goes out first.
Rent from an unregistered landlord
A Rajkot pump workshop, registered under the regular scheme, rents a shed for ₹40,000 a month from a landlord who is not registered. The workshop pays ₹7,200 a month in GST under reverse charge and claims it back as credit.
If the workshop were under the composition scheme, this entry would not apply after 16 January 2025.
04Self-invoice and payment voucher
When you buy from an unregistered supplier under reverse charge, you issue a self-invoice for the purchase. Under rule 47A, it must be issued within 30 days of receiving the goods or services. You also issue a payment voucher when you pay the supplier.
When the supplier is registered, as with many GTAs, their invoice records the purchase and says that tax is payable under reverse charge.
05When the tax becomes due
| Purchase | Tax is due on the earliest of |
|---|---|
| Goods | Receipt of goods, payment, or the day after 30 days from the supplier's invoice |
| Services | Payment, or the day after 60 days from the supplier's invoice |
An advocate's bill dated 5 August and paid on 20 September falls due on the date of payment, which is earlier than the 60-day mark. The tax goes in September's return.
06Paying and claiming
Reverse charge tax is paid only from the electronic cash ledger. It cannot be set off against your input tax credit. Once paid, it is credit like any other: claim it in the same return, subject to the usual conditions and the blocked list in section 17(5).
This has a cash-flow effect. A Surat textile trader paying ₹1,20,000 a month in freight to a GTA that has not chosen to charge GST itself pays the GST on that freight in cash every month, then claims it back as credit in the same return. Ask your transporter which option it has chosen, because that decides the rate and who pays.
07Records to keep
Keep a register of reverse charge purchases with the supplier's name, the self-invoice number, the date of receipt and payment, the tax paid and the return it went into. For a business with a monthly director's fee, a regular advocate and rent from an unregistered landlord, three lines a month cover most of it. The register is what an auditor asks for first.
08E-commerce operators
A separate rule, section 9(5), makes e-commerce operators pay GST on some services sold through them, such as cab rides, hotel stays and restaurant food ordered through apps. The restaurant or driver does not pay tax on those supplies. The operator does.
09Common mistakes
- Missing director fees and legal fees because no GST appears on the bill.
- Paying from credit. The portal blocks it, and some businesses then delay filing while they find the cash.
- Forgetting the self-invoice for purchases from unregistered suppliers.
- Not checking the GTA's option, so tax is paid twice or not at all.
10Services bought from abroad
A Pune design agency paying USD 600 a month for a foreign software subscription imports a service. As a registered business, it pays IGST on the rupee value under reverse charge, in cash, and claims it back as credit in the same return. Many small firms miss this for software and advertising bought online with a card.
This guide is general information as of October 2026 and does not amount to tax advice.