What is Reverse Charge Mechanism (RCM) in ERPNext?
- Reverse Charge Mechanism (RCM) in ERPNext
- ERPNext supports Reverse Charge Mechanism (RCM) where the buyer rather than the supplier pays GST to the government, applicable for specific services and unregistered vendors.
Enabling RCM in ERPNext
On the Supplier master, tick "Is Reverse Charge Applicable" for unregistered vendors. On the Purchase Invoice, the "Is Reverse Charge" checkbox appears. When checked, GST is calculated but not added to the payable to the supplier — instead, a separate liability entry posts the RCM tax payable to the government.
RCM ITC Claim
RCM tax paid can be claimed as ITC in the same period (if the purchase is for business use). ERPNext tracks RCM transactions separately in reports so you can correctly report RCM liability in Table 3.1(d) of GSTR-3B and claim the corresponding ITC in Table 4.
Infonoxe Technologies specialises in ERPNext implementation and custom software for Indian businesses.
Related Terms
Implement ERPNext for Your Business
Expert ERPNext implementation, customisation, and support for Indian businesses.