When you create a bill in Zoho Books for an RCM-applicable transaction (for example, a road transport bill from a GTA, or a legal service bill from an advocate), select “Reverse Charge” in the tax field. Zoho Books then does something unique: it posts the GST as both a liability (RCM Output Tax Payable) and an ITC asset (RCM Input Tax Credit), provided the expense is for a business purpose eligible for ITC. The net effect is zero cash GST outflow in many cases, but the liability and ITC are both reported in GSTR-3B.
Services from unregistered vendors: if you pay a freelancer who is not GST-registered and the service is taxable, you pay RCM GST on their fee. Goods Transport Agency (GTA): if you hire a transporter who issues a consignment note, you pay 5% GST on the freight under RCM. Import of services: if a Pune company pays a UK consultant, the IGST on the consultancy is paid under RCM by the Indian company. Advocate services: any fee paid to a legal advocate by a business attracts 18% RCM GST. Zoho Books supports all these scenarios through the Reverse Charge tax configuration.
When the ITC claimed for an RCM transaction is blocked (for example, RCM GST on a personal expense), the liability creates a real cash outflow to the government. In Zoho Books, this appears as an additional GST payable in GSTR-3B that must be paid in cash. Your CA will identify which RCM transactions attract blocked ITC during the year-end review.
Reverse Charge Mechanism (RCM) in Zoho Books is a GST provision where the buyer pays GST to the government instead of the seller. Zoho Books posts the GST as both a liability and an ITC asset for eligible RCM transactions.
Common RCM transactions include services from unregistered suppliers, GTA transport services, import of services, and advocate fees. Select Reverse Charge in the tax field when recording these bills in Zoho Books.
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