Reverse Charge Mechanism (RCM) under GST is one of those rules that doesn’t make noise until it causes a problem. Many businesses follow it loosely or rely on accountants to flag when it applies — but with every GST Council meeting, the list of goods and services under RCM changes. The updates introduced in 2025 may look minor at first, but they carry real implications for businesses dealing with services like transport, sponsorship, manpower supply, and legal consultancy. If you haven’t reviewed your RCM obligations recently, now’s a good time.

RCM rules have shifted again. Time to take a second look.

If you’ve been handling GST for your business, you already know what reverse charge is. It’s that one section most businesses tend to overlook — until a mismatch shows up in GSTR-2B or a notice arrives.

As of April 2025, the GST Council has rolled out a few changes. Sponsorship services are no longer under reverse charge. There’s also a clarification on how input service distributors should handle inter-state RCM. It’s not a long list of changes, but the impact can be big, especially if you rely on third-party services or deal with transport, manpower, or legal consultants.

We’ve broken down the updated list of goods and services under reverse charge, along with the latest compliance requirements. Whether you’re new to GST or just reviewing your books before filing, it’s worth checking where you stand.

What is RCM?

Under GST, the normal process is that the seller charges tax on the invoice and pays it to the government. But reverse charge is when that responsibility shifts to the buyer. So instead of the seller adding GST, the buyer pays it directly.

This happens in some specific cases. One is when you’re buying from an unregistered supplier. The other is when the government has said that a certain good or service is covered under reverse charge. A few examples would be legal services, goods transport, or manpower supply.

If reverse charge applies, you’re supposed to raise a self-invoice and pay the GST yourself. Then you can claim input tax credit, but only if it’s done properly. If not, the credit might get rejected or flagged.

The rule isn’t new, but the list of items keeps changing. In 2025, a few adjustments have been made. Some services are back under forward charge. Others still need reverse charge treatment. That’s why it’s worth checking which ones apply to your business, so you don’t miss something or make a filing mistake.

List of Goods under Reverse Charge

There aren’t too many goods that come under reverse charge, but the few that are on the list come up a lot in day-to-day business, especially in industries like agriculture, forest produce, and textiles. Sometimes, GST isn’t charged by the supplier at all. Instead of that, the buyer ends up paying it straight to the government. That usually happens when the seller doesn’t have a GST registration, though in some cases it applies even if they are registered; depends on the type of goods or service.

Here’s a list of goods where reverse charge applies in 2025. Most of these are already known from past years, but it’s good to go over them again, especially with the government being stricter about documentation.

Note for 2025

The GST Council hasn’t added new goods this year, but they’ve made it clear that documentation has to be cleaner. If you’re buying from someone who’s not registered, even if it’s a regular vendor, make sure self-invoices are raised and GST is paid in time. A few cases have already come up where ITC was denied just because of missing invoices or delayed reporting.

This list is mostly based on the older notification with the relevant updates till now. No new items added in 2025 so far, but things do shift — so check back around the next GST Council meeting.

Services Under Reverse Charge (2025)

More services fall under reverse charge than goods, and this list keeps shifting. If your business works with transporters, advocates, directors, or security staff through outside agencies, RCM is something you can’t ignore. These are the kinds of transactions where the seller doesn’t add GST — you have to take that up yourself.

A lot of businesses miss these or apply them inconsistently, which can cause ITC mismatches or show up as gaps during scrutiny. It’s best to go over this list once a year — and 2025 has brought a few important updates, especially in sponsorship and ISD-related services.

List of key services under RCM

Changes to watch in 2025

The big one this year is sponsorship services — they’ve moved out of reverse charge and are now taxed under forward charge. So, if you’re paying for event sponsorships or brand tie-ups, make sure the vendor issues a GST invoice. Also, there’s a new clarification on how inter-state service credit should be distributed by ISDs. If your head office pays for a service used by branches, double-check how you’re billing that — it may still need RCM treatment depending on the setup.

These rules haven’t changed much, but the way they’re applied is getting stricter. Some businesses got notices last year just for not raising self-invoices or misreporting services like director payments. It’s worth getting this list right.

RCM Checklist for Day-to-Day Use

Reverse charge isn’t complicated, but it’s easy to miss steps if you’re not looking out for them. The law hasn’t changed much, but GST officers still catch people on basics — like not raising a self-invoice or claiming credit too early. Here’s a rough checklist. Doesn’t cover every case, but it’ll catch most of the common ones.

Before booking anything:

• Check if RCM applies to the item or service. Don’t go by memory — check the actual list.
• See if the supplier is unregistered. That’s usually when RCM applies.
• If it does, you need to raise a self-invoice. Still mandatory.
• Put a note on the entry — mark it clearly as reverse charge.

When you’re filing:

• Report the tax in GSTR-3B under the reverse charge section.
• Claim ITC only after the tax is actually paid. Not before.
• Use your self-invoice number, not the vendor’s bill number.

Every month:

• Go through payments made to freelancers, small suppliers, or any unregistered vendors.
• Keep a copy of each self-invoice somewhere — even if it’s a PDF folder.
• Before you file returns, cross-check your list. Most mistakes happen here.

That’s more or less it. Simple checklist, but worth following each month to avoid problems later.

RCM-Related Changes from the 55th GST Council Meeting

Not a huge list of changes this time, but there are a few updates businesses should take seriously. These won’t affect everyone, but if you’re handling services like sponsorship, or if you deal with ISD credit across branches, this matters.

• Sponsorship services have been moved out of reverse charge.
  Until now, if a company paid for sponsorship, they had to handle the GST under RCM. That’s changed. From April 2025, the person or company providing the sponsorship service must raise a GST invoice and pay the tax. So it’s now a forward charge case. If your company sponsors events or influencers, make sure the vendor is billing GST correctly.
• ISD (Input Service Distributor) rules clarified again.
  If your head office pays for a service used across branches in different states, you can’t just book it under RCM. You have to use the ISD system and follow the rules — separate registration, proper distribution of credit, etc. Some companies were bypassing this. That won’t fly anymore.
• Self-invoicing reminder.
  Still mandatory when buying from unregistered vendors. No exceptions were added. Some assumed the rule was relaxed — it wasn’t.

That’s about it for RCM from the 55th meeting. No major list additions, but these small shifts have big consequences if ignored.

Self-Invoicing and ISD

If you’re buying from someone who isn’t registered under GST, and reverse charge applies, you have to make the invoice yourself. That rule hasn’t changed. A lot of people still miss this. You can’t just keep the vendor’s bill and file your return — GST law says you have to raise a proper invoice and pay the tax from your side.

It doesn’t have to be fancy. Just like a regular invoice — name, GSTIN, value, tax amounts, but mark it as “reverse charge.” Some use a fixed format for this. Others just use their standard invoice template and tweak it. Either works, as long as the details are right and it’s recorded on time.

On ISD — this is about how you pass on input tax credit between different GST registrations. If your head office pays for a service used by branches in other states, you can’t just rebook it through RCM or journal entries. You need an ISD registration and have to distribute credit through that. That’s the rule. The Council made that clear again this year. Some businesses were doing workarounds, but that’s not allowed anymore.

It’s not complicated, but it’s easy to overlook. Just raise the invoice. Register ISD if you need to. Don’t delay or skip it — GST officers are checking this more closely now.

Common Mistakes

RCM looks simple on paper, but it’s one of the first things GST officers check during audits. Not because it’s hard — just because people miss the basics. And once there’s a pattern of mistakes, penalties stack up fast.

Here are some common slip-ups:

• Not raising a self-invoice
  This is still mandatory. Doesn’t matter if the vendor gave you a bill. If they’re unregistered and RCM applies, you have to generate one.
• Paying the tax, but not booking it properly
  Some businesses pay RCM, but it doesn’t show up in the return the right way. Wrong section, or wrong reference number. That alone can block your credit.
• Claiming ITC before paying the RCM amount
  You can’t do that. You get credit after the tax is paid — not when you book the expense.
• Missing RCM on services like director fees or legal help
  These are easy to forget because they don’t come up every day. But they still count.
• Trying to pass ISD transactions through journal entries or internal bills
  Doesn’t hold up. If it’s a cross-state service and credit has to move, it must go through ISD. That’s the rule.

Penalties start with interest on short-paid tax, but they don’t stop there. If the officer sees consistent non-compliance, you’re looking at formal notices, credit reversals, and more paperwork than you want.

Conclusion

Reverse charge under GST isn’t complicated, but it’s strict. You either follow the steps or you don’t — there’s not much room in between. The list of goods and services changes a little each year, but the process stays the same: check the rules, raise the invoice, pay the tax, and claim the credit only when it’s due.

If you’re handling this in-house, build it into your monthly routine. And if you’re not sure whether a transaction falls under RCM, don’t guess — check, or ask.

Missing a few entries here and there might not seem like a big deal, but over time, they add up. Better to catch them early than explain them later.

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