Normally the supplier collects and pays GST. Under the Reverse Charge Mechanism (RCM), that liability shifts to the recipient for certain notified goods and services — common examples include some transport (goods carriage) services and specified imports.
A business under RCM pays the tax itself and, where eligible, can claim it back as input tax credit. Marking such transactions correctly keeps the GSTR-3B liability and the books accurate.
The paperwork under RCM runs backwards. Where the supplier is unregistered, the recipient must raise a self-invoice to document the supply and issue a payment voucher on payment, because no tax invoice will otherwise exist for the records or for the credit claim. The liability and its matching credit are then declared in separate parts of the return — the tax in the liability tables, the credit in the ITC table — never netted into silence.
Take a company receiving a ₹50,000 bill from an advocate, arriving without GST because notified legal services fall under reverse charge. The company self-assesses ₹9,000 at 18%, pays it with the return, and claims the same ₹9,000 as input tax credit if eligible. For a fully creditable business the net cost is nil, yet the compliance is not optional — and for a business making exempt supplies the reverse-charge tax sticks as a genuine cost.
The misses are systematic rather than careless. Imported services — overseas software subscriptions, foreign advertising platforms, offshore consultants — are reverse-charge supplies that arrive as ordinary-looking foreign invoices and slip past accounts payable. Freight from goods transport agencies gets booked without the tax entry. And because the time of supply under RCM runs from payment or a short statutory period after the invoice, liabilities can fall due in a month before anyone has thought about the return.