The last duty standing: why India still taxes your aluminium scrap, and who is fighting to change it

India runs its aluminium recycling on imported scrap. By the recyclers' own estimate, imported material meets 80 to 85 percent of the country's aluminium scrap requirement, because domestic collection simply does not generate enough. So the duty sitting on that imported scrap is not a side issue for a secondary smelter or a trader, it is a line straight through the cost of goods. Right now that duty is 2.5 percent, and it has become the subject of a two-sided lobbying fight whose result the next Union Budget, due in February 2027, will decide.

The numbers at a glance

Aluminium is the last base-metal scrap still taxed

The context that makes this fight live is a sequence of earlier Budget decisions. According to the recycling industry, copper, zinc and lead scrap were all exempted from basic customs duty in the 2025-26 Budget, leaving aluminium scrap as the only major base-metal scrap category that still carries one. Primary aluminium is taxed much higher, so the 2.5 percent on scrap looks small next to it, but for a recycler buying almost all of their feed from abroad, 2.5 percent on roughly 20 lakh tonnes a year is real money.

The 2.5 percent has already survived one Budget. In 2026-27 the rate was left unchanged, even as some producer-side bodies pushed for a much higher flat duty on aluminium products. So neither side got what it wanted last time, which is exactly why both have come back harder for the next one.

The recyclers want it gone

The Material Recycling Association of India has asked the government to abolish the 2.5 percent duty outright, in a representation reported in July 2026. Their case is built for the importer and the MSME remelter:

• Cost and competitiveness. The duty raises raw-material cost for recyclers and the manufacturers they supply, in a sector that is 80 to 85 percent dependent on imported scrap.
• India is the outlier. Competing recycling hubs such as Thailand, Malaysia, Indonesia, Japan and South Korea allow aluminium scrap in duty-free.
• Supply security. With export curbs on scrap tightening in the European Union, the United States, the Gulf and parts of Africa, the recyclers argue India cannot afford to make its own imports more expensive.
• Scale and jobs. Secondary aluminium output has climbed from 0.85 million tonnes in FY 2015-16 to about 2.2 million tonnes in FY 2025-26, roughly 35 percent of the country's aluminium use, supporting a large recycling workforce.

MRAI has also said a Joint Working Group under the Ministry of Mines recommended that removing the duty be considered, which is the strongest official signal the recyclers have to point to.

The producers want it kept, then raised

The Aluminium Association of India wants the opposite, and its representation to the Ministry of Finance and the Ministry of Mines, reported on 8 July 2026, is more conditional than a simple "keep it". The association asks the government to:

• Hold the 2.5 percent basic customs duty for now, rather than remove it.
• Then raise it to 7.5 percent on low-grade scrap, specifically Grade 3 to Grade 7, once two things are in place: a notified BIS quality standard for aluminium scrap, and grade-wise HSN codes under heading 7602 so customs can tell the grades apart.

Their argument is about quality, not just protection. The association points to a record import bill, all aluminium imports under Chapter 76 hit 3,479 KT in FY 2025-26, worth ₹88,434 crore, of which scrap alone was 2,028 KT worth ₹40,203 crore, and warns that without a standard, substandard scrap flows in freely and undercuts quality and safety downstream.

The BIS standard is the real variable

Behind the duty number sits the thing that will actually reshape what you can import: a BIS standard for aluminium scrap, titled "Aluminium and Aluminium Alloy Scrap, Requirements and Conditions of Delivery", which the producers say has stayed pending for more than two years.

If it is notified, two things change at once. Scrap would have to meet a defined quality specification to clear, and grade-wise HSN codes would let customs, and any future duty, treat Grade 3 to Grade 7 low-grade material differently from cleaner grades. That is why the producers want the duty question settled only after the standard exists, because a standard plus grade-wise codes is what makes a 7.5 percent low-grade duty enforceable in the first place. For an importer, the standard is potentially a bigger operational change than the 2.5 percent itself.

What this means for you

If you import or remelt aluminium scrap, plan for both outcomes rather than betting on one. A removal of the 2.5 percent would cut your landed cost directly, and the recyclers have an official working-group mention in their favour, but the duty has already survived one Budget, so do not treat removal as done. The more disruptive scenario is the BIS standard landing: if it is notified, lower grades may face both a documentation and a quality-conformity hurdle at the port, and potentially a higher 7.5 percent duty on Grade 3 to Grade 7. Know exactly which grades you buy, because the whole fight is about splitting clean scrap from low-grade, and that split is where any new cost will fall. Watch the February 2027 Budget and the BIS notification as the two triggers that move your numbers.

What to watch

• The February 2027 Union Budget. This is where the 2.5 percent is kept, cut or restructured. Everything else is positioning until then.
• The BIS aluminium scrap standard. Its notification would introduce quality-conformity at import and enable grade-wise duties. Track whether it moves from pending to notified.
• Grade-wise HSN codes under 7602. Without them, a differentiated low-grade duty cannot be applied; with them, Grade 3 to Grade 7 becomes a separate, dutiable line.
• The Ministry of Mines position. The working-group signal the recyclers cite suggests the ministry is weighing removal, so its stance going into the Budget matters.
• Export curbs abroad. Tightening scrap-export rules in the EU, the United States and the Gulf affect both the price and the availability of the scrap you depend on.

The bottom line

Aluminium scrap is where India's base-metal duty policy still has an open question, and for once the recyclers and the producers are asking for opposite things at the same Budget. Removal would help your cost; a BIS standard with grade-wise duties would reshape what you can land and at what grade. Decide which grades your business lives on, and watch February 2027, because that is when the uncertainty finally resolves into a number.