What is the reverse charge mechanism under GST and when does an India subsidiary need to pay it?

Normally, the supplier charges GST and remits it to the government. Reverse charge flips this: for specified categories of supply — most relevantly for MNCs, the import of services from a person located outside India — the Indian recipient is responsible for self-assessing and paying GST directly, then claiming input tax credit if the service is used for business purposes.

This applies routinely to India subsidiaries paying management fees, royalties, or technical service fees to a foreign parent: the subsidiary pays GST under reverse charge on that payment, files it in its own return, and can typically claim it back as input credit if the underlying expense is eligible. Missing reverse charge on intercompany payments is a common compliance gap, since there's no invoice from the foreign parent prompting the India team to account for it.