Tax Laws and Practice · Levy and Collection of GST

Reverse Charge Mechanism under Section 9(3) and 9(4)

Updated 11 October 2026 · Fact-checked

Under reverse charge, the recipient, not the supplier, pays GST. Section 9(3) covers notified categories of goods or services. Section 9(4) covers notified classes of registered persons receiving notified supplies from unregistered suppliers. To solve a question, check the notification, find the recipient, compute tax on the value, pay it in cash, then claim credit if eligible.

Understand Reverse Charge Mechanism under Section 9(3) and 9(4)

Normally the supplier collects GST from the buyer and pays it to the Government. This is forward charge. Section 9(1) levies CGST on intra-State supplies, and the tax is paid by the taxable person, which usually means the supplier.

Under the reverse charge mechanism (RCM), the liability flips. The recipient pays the tax directly to the Government. The law does this because some suppliers are hard to track or are unregistered. Making the recipient liable protects revenue.

Section 9(3) lets the Government, on the Council's recommendation, notify categories of goods or services on which tax is paid by the recipient. Once notified, all provisions of the Act apply to the recipient as if he were the person liable to pay tax on that supply. This applies whether or not the supplier is registered. Notified items are decided by notification, so in the exam you are normally given the facts and told or expected to know that the supply is notified.

Section 9(4) is different. The Government may notify a class of registered persons who must pay tax on reverse charge on specified categories of goods or services received from an unregistered supplier. Two conditions must both hold: the recipient belongs to the notified class, and the supply is of a specified category from an unregistered supplier. Supplies from registered suppliers are outside 9(4).

Under both sub-sections the recipient is treated as the person liable to pay. So the recipient must follow the Act, including self-invoicing, paying tax and, where eligible, claiming input tax credit. Remember the credit rule in section 16: credit needs, among other things, that tax has actually been paid to the Government. Under RCM the recipient pays first in cash, then claims credit.

Key rules to remember

Section 9(3) rule: Notified category of goods or services → recipient pays tax on reverse charge; All provisions of the Act apply to the recipient as if he is the person liable to pay tax. Applies whether the supplier is registered or not, as the notification provides.
Section 9(4) rule: Notified class of registered recipient + specified supply + unregistered supplier → recipient pays tax on reverse charge; All three conditions must be met. Supply by a registered supplier is not covered.
RCM tax computation: Tax payable by recipient = Value of supply (section 15) × notified rate; For an intra-State supply, split into CGST and SGST/UTGST at half the rate each. Rate cannot exceed 20% for CGST under section 9(1).
Forward vs reverse charge: Forward charge: supplier pays. Reverse charge: recipient pays; Under RCM the recipient has to pay tax in cash first; credit is claimed afterwards if the section 16 conditions are met.
Credit condition on payment of tax: ITC needs tax charged to be actually paid to the Government (section 16(2)(c)); So RCM tax must be paid before credit is taken.

How to solve Reverse Charge Mechanism under Section 9(3) and 9(4) questions

Use this method for any RCM question, whether it asks for the person liable, the tax amount or the credit position.

1Identify the supplier, the recipient and whether each is registered.
2Decide whether the supply is intra-State, since section 9 levies CGST on intra-State supplies.
3Check whether the supply falls in a category notified under section 9(3). If yes, the recipient is liable.
4If not, check section 9(4): is the recipient in the notified class, is the supply of a specified category, and is the supplier unregistered? All three must be met.
5If neither applies, forward charge applies and the supplier pays.
6Compute the value under section 15 and apply the rate, splitting it into CGST and SGST/UTGST for intra-State supplies.
7State that the recipient pays the tax in cash and then examine ITC eligibility under section 16, including use in business and payment of tax.
8Write a clear conclusion naming who pays, how much, and the credit position.

Quickest way: Three-question RCM check

When to use it: Use when time is short and the question asks only who is liable to pay GST.

Is the supply of a notified category? If yes, recipient pays under section 9(3).
Otherwise, is the supplier unregistered, the supply specified and the recipient of a notified class? If yes, recipient pays under section 9(4).
If both answers are no, the supplier pays under forward charge. Then write tax = value × rate, and cite section 9 in your conclusion.

Common mistakes in Reverse Charge Mechanism under Section 9(3) and 9(4)

Applying section 9(4) to a supply from a registered supplier.
Students mix up 9(3) and 9(4) because both shift liability to the recipient.
Fix: Remember that 9(4) needs an unregistered supplier. 9(3) works on the notified category, regardless of supplier status as notified.
Assuming every purchase from an unregistered person attracts RCM.
Students read 9(4) as a general rule.
Fix: It applies only to a notified class of registered recipients for specified categories. Without notification, no RCM arises.
Claiming input tax credit before paying RCM tax.
Students think RCM tax is a book entry only.
Fix: Section 16(2)(c) requires that tax charged has actually been paid to the Government. Pay first, then claim credit.
Saying RCM supplier charges GST on the invoice.
Students carry forward-charge habits into RCM.
Fix: Under RCM the supplier does not collect tax. The recipient computes and pays it.
Treating RCM as a separate tax.
The name sounds like a different levy.
Fix: It is the same CGST/SGST. Only the person liable to pay changes.

Worked examples

Example 1

Explain the scope of section 9(3) and 9(4) of the CGST Act, 2017, and state how they differ.

Show the solution

Provision: Under section 9(3), the Government, on the Council's recommendation, may notify categories of supply of goods or services or both on which tax is paid on reverse charge by the recipient. All provisions of the Act apply to such recipient as if he is the person liable to pay tax.
Under section 9(4), the Government may notify a class of registered persons who, for specified categories of goods or services or both received from an unregistered supplier, pay tax on reverse charge as recipient.
Analysis: Section 9(3) turns on the category of supply. Section 9(4) turns on three things: a notified class of registered recipient, a specified category of supply and an unregistered supplier.
Under both, the recipient becomes the person liable and must comply with the Act.

Answer: Both sub-sections shift liability to the recipient. Section 9(3) depends on a notified category of supply. Section 9(4) applies only to a notified class of registered recipients buying specified supplies from unregistered suppliers.

Example 2

A registered company in Pune receives a service that is notified under section 9(3) for reverse charge. The value of the service is ₹2,00,000 and the notified rate is 18%. The supply is intra-State. Compute the tax payable by the company and comment on credit.

Show the solution

Provision: Under section 9(3), tax on the notified service is payable by the recipient on reverse charge.
Value of supply = ₹2,00,000.
Total tax = ₹2,00,000 × 18% = ₹36,000.
Intra-State supply, so split equally: CGST at 9% = ₹18,000 and SGST at 9% = ₹18,000.
The company must pay ₹36,000 in cash to the Government.
Credit: Under section 16, credit is available if the service is used or intended to be used in the course or furtherance of business, the other conditions are met and the tax has actually been paid.

Answer: The company pays ₹18,000 CGST and ₹18,000 SGST, total ₹36,000, in cash. It may claim the same amount as input tax credit if the section 16 conditions are satisfied.

Exam tips

Quote the sub-section number. Write 'section 9(3)' or 'section 9(4)' with the key words of the provision.
In theory answers, state the three conditions of section 9(4) separately so each earns a mark.
For numerical questions, show value, rate, CGST and SGST split and the cash payment, then comment on credit.
Mention that rates and notified categories come from notifications, and do not invent lists you are unsure of.
Add a one-line conclusion naming who pays the tax.

Practice questions from Levy and Collection of GST

Reverse Charge Mechanism under Section 9(3) and 9(4) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Reverse Charge Mechanism under Section 9(3) and 9(4): frequently asked questions

What is the difference between forward charge and reverse charge?

Under forward charge the supplier collects and pays the tax. Under reverse charge the recipient pays tax directly to the Government. Reverse charge applies only where the law or a notification provides for it.

Does section 9(4) apply to all unregistered suppliers?

No. It applies only when a notified class of registered persons receives specified categories of supplies from an unregistered supplier. All three conditions must be met.

Can I claim input tax credit on tax paid under reverse charge?

Yes, if the conditions of section 16 are met. These include use in the course or furtherance of business and actual payment of tax to the Government. You pay the tax first and then claim credit.

Who notifies the goods and services under reverse charge?

The Government notifies them on the recommendations of the GST Council. Section 9(3) and 9(4) both work through such notifications.