Reverse Charge under GST: Applicability, Invoicing and ITC Basics

Reverse charge under GST means the liability to pay tax shifts from the supplier to another person identified by the law. In most day-to-day professional work, that means the recipient pays GST under section 9(3) or section 9(4) of the CGST Act. A related but distinct shift happens under section 9(5), where an electronic commerce operator becomes liable for notified services supplied through its platform.

This matters because reverse charge changes four things at once: who deposits tax, what documents must be created, when liability arises, and when input tax credit can be taken.

Where reverse charge applies

The point most readers miss about section 9(4)

Section 9(4) is not a blanket rule for every purchase from an unregistered supplier. The current law requires a notification specifying the class of registered persons and the relevant supplies. For current practice, this is why professionals should read section 9(4) together with the operative notification rather than rely on older summaries.

One important change-sensitive example is in real estate: CBIC's 2019 rate notifications created a specific section 9(4) framework for promoters. Another change-sensitive example sits under section 9(3): Notification No. 09/2024-Central Tax (Rate), effective from October 10, 2024, inserted reverse charge for renting of any property other than residential dwelling when supplied by an unregistered person to a registered person.

How to decide whether a transaction is under reverse charge

1. Identify the charging route. Ask whether the case is a notified supply under section 9(3), a notified unregistered-supplier case under section 9(4), or an electronic commerce operator case under section 9(5).
2. Identify the exact supply. Reverse charge does not change classification. The underlying supply still needs the correct nature, place of supply, and rate.
3. Check the supplier and recipient conditions. Many notified entries apply only when the recipient belongs to a particular class, or when the supplier is unregistered, or when the supply happens through an electronic platform.
4. Fix the time of supply. For goods under reverse charge, section 12(3) applies. For services, the CBIC FAQ reflects section 13(3) rules.
5. Create the correct documents and pay tax in cash. Reverse charge liability is not paid through the electronic credit ledger because output tax excludes tax payable on reverse charge basis and section 49 allows credit ledger utilisation only for output tax.
6. Claim ITC only after the tax is properly paid and the normal credit conditions are satisfied.

Current notified areas professionals commonly encounter

Section 9(3) recipient-side reverse charge

The most practical reference point is Notification 13/2017-Central Tax (Rate), read with its amendments. Businesses commonly run into reverse charge for notified services such as legal services, certain goods transport agency cases, and services supplied by a director to a company or body corporate. The list is notification-driven, so the right habit is to verify the exact entry rather than assume all similar services are covered.

A notable change-sensitive property example is the reverse charge entry inserted by Notification No. 05/2022-Central Tax (Rate) for renting of residential dwelling to a registered person. If your issue is specifically about rent, the separate CA Samaaj explainer on new GST rules for rent is the more useful follow-on read because the answer depends heavily on the type of property, the recipient's registration status, and the current notification.

Section 9(4) notified purchases from unregistered suppliers

This route now operates only where the Government has specifically notified it. For many readers, the practical takeaway is simple: do not create section 9(4) liability merely because the vendor is unregistered. First check whether the recipient class and supply category are actually notified.

Section 9(5) electronic commerce operator liability

This is often grouped with reverse charge in practice, but legally it is different from classic recipient-side RCM because the liability moves to the operator, not to the buyer. The current notified framework under Notification 17/2017 and its amendments covers passenger transport through specified vehicle categories, certain accommodation supplied through platforms, house-keeping services such as plumbing and carpentering supplied through platforms, and restaurant service supplied through an operator subject to the notified exclusions and definitions. Important later changes include Notification 17/2021 for restaurant service, Notification 16/2023 for omnibus-related changes effective October 20, 2023, and Notification 08/2025 updating the definition of specified premises effective April 1, 2025.

Invoicing, self-invoicing and payment vouchers

Three document rules matter most.

• Under Rule 46, a tax invoice should indicate whether tax is payable on reverse charge basis.
• Under section 31(3)(f), where a registered person liable under section 9(3) or 9(4) receives goods or services from an unregistered supplier, the recipient must issue an invoice in respect of that receipt.
• Under section 31(3)(g), the recipient must issue a payment voucher when making payment to that supplier.

There was also a practical change from November 1, 2024: the note to Rule 46 records that the earlier proviso allowing certain consolidated month-end invoicing for section 9(4) cases was omitted by Notification No. 20/2024-Central Tax.

For e-invoicing, the official GST e-invoice FAQ states that if a notified supplier issues an invoice for an outward supply that attracts reverse charge under section 9(3), e-invoicing still applies where that supplier otherwise falls within the e-invoicing system. The same FAQ also clarifies that inward reverse-charge cases involving unregistered persons do not create a supplier-side e-invoice. See the official FAQ at GST e-Invoice System.

When does tax become payable

For goods, section 12(3) says the time of supply under reverse charge is the earliest of receipt of goods, payment entry or bank debit, or the day immediately after thirty days from the supplier's invoice.

For services, the official CBIC reverse charge FAQ reflects the section 13(3) rule: the earlier of payment entry or bank debit, or the day immediately after sixty days from the supplier's invoice. That difference between goods and services regularly affects month-end liability reviews.

ITC basics after payment of reverse charge

GST paid under reverse charge is part of input tax, but credit still depends on the normal conditions in section 16 and any block under section 17. Two points are especially important.

• You must first discharge the reverse charge liability. Payment through the electronic credit ledger is not the route for the tax itself.
• The 180-day supplier payment reversal rule in section 16 does not apply to supplies on which tax is payable on reverse charge basis.

If you want a fuller ITC refresher after this topic, CA Samaaj's article on input tax credit under GST is the most relevant companion read because RCM credit often fails on ordinary section 16 and section 17 issues rather than on the reverse charge rule itself.

Three examples that resolve common confusion

Example 1: director's fee paid by a company

Assumptions: ABC Private Limited is registered in Karnataka. It pays a director fee for board services. The relevant service is covered by the notified section 9(3) entry.

Result: ABC pays GST under reverse charge, not the director. ABC records the liability in the period determined by the time-of-supply rule, pays the tax through cash ledger, and may then claim ITC if the expense is used in business and no credit block applies.

Example 2: registered tenant rents commercial office from an unregistered landlord after October 10, 2024

Assumptions: XYZ LLP is GST-registered in Delhi. It takes office premises on rent from an unregistered owner. The arrangement falls within the entry inserted by Notification No. 09/2024-Central Tax (Rate), effective October 10, 2024.

Result: XYZ LLP, as the registered recipient, bears the GST liability under reverse charge. The landlord does not charge GST on the invoice. XYZ should evaluate place of supply, rate, self-documentation where required, and ITC eligibility based on its actual business use.

Example 3: restaurant supplies through an app

Assumptions: A restaurant supplies food through an electronic commerce operator, and the supply is not excluded as a service supplied at specified premises.

Result: This is not a recipient-side RCM case. The liability shifts to the electronic commerce operator under section 9(5). The customer does not pay GST under reverse charge merely because the order was placed through a platform.

Common errors in professional practice

• Treating every purchase from an unregistered supplier as section 9(4). That is not the current law position.
• Using input tax credit to pay the reverse charge liability itself.
• Missing the self-invoice or payment voucher trail in unregistered-supplier cases.
• Assuming ITC is automatic after RCM payment even where section 17 blocks the credit.
• Confusing section 9(5) operator liability with classic recipient-side reverse charge.
• Missing change dates in property and platform-based supplies.

Working checklist

• Pin the transaction to section 9(3), 9(4), or 9(5).
• Read the operative notification entry, not just a summary.
• Confirm supplier status, recipient status, and any platform condition.
• Determine the underlying GST rate and place of supply.
• Apply the correct time-of-supply rule for goods or services.
• Create invoice and payment voucher documentation where required.
• Discharge tax through the cash ledger.
• Take ITC only after section 16 and section 17 review.