GST on Scrap from 1 November 2026: What Sellers, Buyers and Dealers Must Do

Almost every factory produces scrap: metal turnings, plastic offcuts, worn tyres, old electronics. For years, much of it was sold to small unregistered dealers and the GST on it was easy to lose. From 1 November 2026, CBIC has closed that gap in three steps (Notifications 04/2026-Central Tax (Rate), 06/2026-Central Tax and 07/2026-Central Tax, all dated 27 October 2026).

The three changes

A worked example

A Ranipet engineering unit sells ₹4,00,000 of steel scrap a month to a registered dealer in Vellore under one contract, at 18% GST (₹72,000). The figures are fictional.

The ₹8,000 is not lost. The dealer deposits it and files GSTR-7 by the 10th of the next month; the factory accepts the amount on the portal and it reaches its electronic cash ledger, where it can pay the factory’s own GST. If the dealer were unregistered, the factory would charge GST as usual and no TDS would apply; the reverse charge applies the other way round, when a registered business buys from an unregistered seller.

What each party should do

• The factory selling scrap. Keep billing GST. Check that each buyer’s GSTIN is active, track the TDS deducted by buyers, accept it on the portal every month and match it with the payments received.
• The business buying scrap. Find out which suppliers are unregistered and pay GST under reverse charge on those purchases (with a self-invoice). Register as a GST TDS deductor (REG-07) if you buy from registered sellers on contracts above ₹2.5 lakh, deduct 2%, deposit it and file GSTR-7.
• The scrap dealer. Register once your turnover crosses the limit (₹40 lakh for goods only, in Tamil Nadu). Registered buyers will deduct 2% TDS from your payments; claim it each month so that it reduces your cash tax.

Common mistakes

• Deducting TDS on the GST amount. TDS is on the value without the tax: ₹8,000 on ₹4,00,000, not on ₹4,72,000.
• Splitting one contract into small bills to stay under ₹2.5 lakh. The limit is per contract, not per invoice.
• Forgetting the transition. For supplies around 1 November, which rule applies depends on the dates of supply, invoice and payment.

Questions people ask

Does this change the GST rate on scrap? No. Steel and most metal scrap stay at 18%. The changes are about who pays and who must register.

We sell scrap only twice a year. Do we register for TDS? The deduction is the buyer’s job, not the seller’s. A seller only needs to accept the TDS credit on the portal.

Your next practical step

List your scrap buyers and sellers for the last three months, mark which are registered, and estimate the monthly contract value with each. That one table tells you whether you will pay reverse charge, deduct TDS or receive TDS from January’s returns onwards.

Opens a short definition