The Reverse Charge Mechanism (RCM) under GST 2.0 is a key provision that shifts the liability to pay tax from the supplier to the recipient. This system ensures compliance in cases where suppliers are unregistered or specific services require reverse charge. Here’s a detailed guide to RCM under GST 2.0 in 2025.

What is Reverse Charge Mechanism (RCM)?

Under RCM, the recipient of goods or services is responsible for paying GST instead of the supplier. This mechanism is designed to capture tax from transactions where the supplier may not be registered or falls under specific notified categories.

Applicability of RCM under GST 2.0

• Services provided by an unregistered supplier to a registered recipient
• Specified goods like cashew nuts, tobacco leaves, or lottery tickets
• Goods and services notified by the government under Section 9(3) or Section 9(4)
• Imports of goods or services from outside India

Step-by-Step Compliance for RCM

• Identify if the transaction is liable under RCM
• Calculate GST applicable on goods or services
• Report RCM transactions in GST return (GSTR-3B / GSTR-2B)
• Deposit the GST with government within the prescribed timeline
• Claim Input Tax Credit (ITC) if eligible

RCM Reporting in GST 2.0

GST 2.0 simplifies RCM compliance by automated invoice matching and validation:

Benefits of RCM Compliance

• Ensures tax collection from unregistered or notified suppliers
• Reduces chances of tax evasion
• Helps businesses maintain proper ITC claims
• Promotes transparency in high-value or notified transactions

Conclusion

Understanding the Reverse Charge Mechanism under GST 2.0 is essential for businesses to stay compliant. Proper identification of RCM transactions, timely GST payment, and accurate reporting ensures seamless compliance and helps in claiming eligible Input Tax Credit.