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GST worked examples: reverse charge

Worked examples of reverse charge: goods transport agencies, advocates, sponsorship, directors, rent from unregistered landlords, and real-estate promoters, with the 2024–25 changes.

Published 4 October 2026

Under reverse charge the recipient, not the supplier, pays the tax. It applies to supplies notified under section 9(3) CGST Act (and section 5(3) IGST Act), and to specified purchases by real-estate promoters under section 9(4). Tax under reverse charge must be paid in cash — the credit ledger cannot be used for it (section 49(4)) — and the recipient may then take credit if otherwise eligible. Figures are illustrations; rates are those in force on 04.10.2026.

D.1 — Goods transport agency

Facts. A Mumbai factory uses a Mumbai transport agency (GTA) that charges 5% and has not opted for forward charge; freight Rs. 50,000.

  1. GTA services to a factory, company, partnership firm, registered person or other specified recipient are under reverse charge when taxed at 5% without credit (Notification 13/2017-Central Tax (Rate)).
  2. The factory pays CGST 2.5% + SGST 2.5% = Rs. 2,500 in cash, and takes credit of it in the same return.
  3. A GTA may instead opt to charge tax itself — at 5% without credit, or 18% with credit (rates from 22.09.2025); reverse charge then does not apply.

Result. Cash outflow of Rs. 2,500, offset by credit in the same month.

D.2 — Legal services by an advocate

Facts. A Delhi company engages an advocate for Rs. 1,00,000.

  1. Legal services by an individual advocate or firm of advocates to a business entity are under reverse charge (Notification 13/2017-Central Tax (Rate)).
  2. The advocate does not charge tax; the company pays CGST 9% + SGST 9% = Rs. 18,000 and takes credit.

Result. Reverse charge, credit available.

D.3 — Sponsorship

Facts. A company sponsors an event for Rs. 5,00,000. In case (a) the organiser is a partnership firm; in case (b) it is a company.

  1. Sponsorship services provided to a body corporate or partnership firm were under reverse charge; from 16.01.2025, sponsorship provided by a body corporate is excluded (Notification 7/2025-Central Tax (Rate)).
  2. Case (a): the sponsoring company pays IGST or CGST + SGST at 18% under reverse charge.
  3. Case (b): the organising company charges 18% under forward charge.

Result. Who pays depends on whether the organiser is a body corporate.

D.4 — Directors' sitting fees

Facts. A Mumbai company pays an independent director sitting fees of Rs. 2,00,000.

  1. Services supplied by a director to the company are under reverse charge (Notification 13/2017-Central Tax (Rate)).
  2. The company pays CGST 9% + SGST 9% = Rs. 36,000 and takes credit. The director need not register for these services.
  3. Remuneration paid to a whole-time director as an employee, treated as salary, is not a supply (Schedule III, para 1; Circular 140/10/2020-GST).

Result. Reverse charge on sitting fees and fees of independent directors.

D.5 — Office rented from an unregistered landlord

Facts. A registered trader (not under composition) rents a shop from an unregistered individual for Rs. 1,00,000 a month.

  1. From 10.10.2024, renting of property other than residential dwellings by an unregistered person to a registered person is under reverse charge (Notification 9/2024-Central Tax (Rate)); from 16.01.2025 composition taxpayers are excluded.
  2. The trader pays CGST 9% + SGST 9% = Rs. 18,000 each month and takes credit.
  3. Renting a residential dwelling to a registered person is separately under reverse charge (from 18.07.2022), with an exemption where the tenant is a proprietor renting for personal residence in his own name.

Result. Rs. 18,000 a month payable by the tenant, creditable if the premises are used in business.

D.6 — Real-estate promoter buying from unregistered suppliers

Facts. A promoter building a residential project pays the 5% (without credit) rate. In a year, 30% of its inputs and input services by value (other than exempt items and items excluded by the notification) came from unregistered suppliers; separately, it bought cement worth Rs. 10,00,000 from an unregistered supplier.

  1. Under section 9(4) and Notification 7/2019-Central Tax (Rate), a promoter must buy at least 80% of such inputs and services from registered suppliers. On the 10% shortfall, it pays tax at 18% under reverse charge, by the end of the quarter following the financial year.
  2. Cement bought from an unregistered supplier is under reverse charge whatever the percentage, at the cement rate — 18% from 22.09.2025 (28% before): Rs. 1,80,000.
  3. No credit: the promoter pays tax at the concessional rate without credit.

Result. A real cost, which is why promoters keep their procurement registered.

D.7 — Import of services

Tax on services received from a supplier outside India is paid by the Indian recipient under reverse charge — see example C.6 in the guide on imports, exports and SEZ supplies.

Procedure common to all reverse-charge supplies

  • Time of supply: the earlier of payment and sixty days after the supplier's invoice (section 13(3); for goods, thirty days — section 12(3)).
  • Where the supplier is unregistered, the recipient issues a self-invoice (section 31(3)(f)) and a payment voucher.
  • Report in GSTR-3B: tax payable under reverse charge, and the credit taken.
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