Reverse charge (RCM) entries

When RCM applies

Common cases: goods transport agency (GTA) services, legal services from an advocate, sponsorship, services from a director to the company, and renting of commercial property by an unregistered person to a registered business.

Ledgers

• Output CGST/SGST/IGST (RCM) under Duties & Taxes (the liability)
• Input CGST/SGST/IGST (RCM) (the credit you can claim after paying)

Example: legal fees ₹50,000 from an advocate, 18% under RCM

Book the bill (F9/F7)

Legal Fees A/c                 Dr    50,000
    To Advocate A/c                               50,000

Record the RCM liability and credit (F7)

Input CGST (RCM) A/c           Dr     4,500
Input SGST (RCM) A/c           Dr     4,500
    To Output CGST (RCM) A/c                       4,500
    To Output SGST (RCM) A/c                       4,500

Pay the RCM tax in cash (F5)

Output CGST (RCM) A/c          Dr     4,500
Output SGST (RCM) A/c          Dr     4,500
    To Bank A/c                                    9,000

Rules to remember

• RCM tax must be paid in cash. Input credit cannot be used to pay it.
• You can claim the input credit in the same month's GSTR-3B after paying.
• Issue a self-invoice when buying from an unregistered supplier under RCM.
• The supplier's bill shows no GST. Do not pay GST to the supplier.