The Central Board of Indirect Taxes and Customs (CBIC) has expanded the scope of the Reverse Charge Mechanism (RCM) under Goods and Services Tax (GST), effective 1 November 2026.
Pursuant to Notification No. 04/2026–Central Tax (Rate) dated 27 October 2026, the RCM framework has been extended to cover four additional categories of specific waste, scrap, and by-products when supplied by an unregistered person to a registered person.
Newly Notified RCM Categories:
The statutory tax liability shifts entirely to the registered recipient for the following newly inserted entries under Section 9(3) of the CGST Act, 2017:
S.No. HSN Code Description of Goods
2A 1518 Used Cooking Oil
3B 3915 Waste and Scrap of Plastics
3C 4004 Waste and Scrap of Tyres
9 8549 Electrical and Electronic Waste and Scrap
Key Implications for Taxpayers
Registered businesses procuring any of the aforementioned items must immediately align their procurement and account workflows with the following directives:
a) Shift in Tax Liability:
The registered buyer is solely liable to calculate and deposit the applicable GST directly with the government.
b) Threshold Exemption Inapplicability:
This RCM liability applies unconditionally. The recipient must discharge the tax even if the unregistered supplier’s aggregate turnover falls below the standard threshold limit for mandatory GST registration.
c) Mandatory Cash Discharge:
In accordance with GST provisions, RCM liabilities cannot be settled using existing balances in the Electronic Credit Ledger. The entire tax component must be paid in cash via the Electronic Cash Ledger.
d) Input Tax Credit (ITC) Availability:
The purchasing entity can claim Input Tax Credit on the GST paid under RCM, subject to standard eligibility criteria outlined under Section 16 and Section 17 of the CGST Act.
e) Self-Invoicing & Payment Vouchers:
Because the supplier is unregistered, the registered recipient must comply with Section 31(3)(f) and issue a self-invoice alongside a payment voucher at the time of making payment to the supplier.
f) E-Invoicing Alignment:
Additionally, businesses with an Aggregate Annual Turnover (AATO) exceeding ₹5 Crore must note the recent introduction of RCMDOM and RCMIMP supply types on the GST E-Invoicing Portal. This requires eligible businesses to report self-invoices on the Invoice Registration Portal (IRP) to generate an Invoice Reference Number (IRN).
Recommended Compliance Actions
a) Update Enterprise Resource Planning (ERP) and account master configurations to tag HSNs 1518, 3915, 4004, and 8549 under the reverse charge tax code for unregistered vendors.
b) Train internal Accounts Payable (AP) and procurement teams on the strict 30-day self-invoicing discipline under Rule 47A.
Above Information is for educational purposes only