Plastic Scrap Without a GSTIN Now Costs the Buyer 18%, Upfront and in Cash

Metal scrap went through this in October 2024. Plastic has just caught up, and the trade has had barely a week to notice.

Three notifications, all dated 27 October 2026 and all in force from 1 November 2026, put waste and scrap of plastics under tariff heading 3915 into the same tax machinery that metal scrap has lived inside for two years. A fourth, dated 26 October 2026, sets a date further out that matters more than any of them.

Taken together they do something simple and far-reaching. They make it administratively cheaper for a recycler or a converter to buy from a supplier with a GSTIN than from one without. Nothing in the text says that. It is the arithmetic of the three rules working at once.

The numbers at a glance

What the three notifications actually say

Read them in the order a load of scrap moves.

Notification 04/2026-Central Tax (Rate) inserts a new entry, serial number 3B, into the reverse charge list of notification 4/2017-Central Tax (Rate). Heading 3915, waste and scrap of plastics, supplier "any unregistered person", recipient "any registered person". When an unregistered supplier sells plastic scrap to a registered business, the buyer pays the tax, not the seller. The notification sets no rate of its own. The rate comes from the rate schedule, where heading 3915, waste, parings and scrap of plastics, sits in Schedule II at 18%.

Notification 06/2026-Central Tax rewrites the proviso to notification 5/2017-Central Tax. That 2017 notification exempted from registration anyone whose entire outward supply is taxed in the hands of the recipient. The new proviso says the exemption does not apply to a person supplying plastic waste and scrap, along with used cooking oil, tyre waste, metal scrap and e-waste. Read it carefully, because this is where most of the loose talk starts. It withdraws one specific exemption. It does not by itself drag every small dealer into registration. The ordinary turnover threshold, ₹40 lakh of goods in most states, is untouched. What it removes is the route by which a supplier above that threshold could stay outside the system purely because the buyer was paying the tax.

Notification 07/2026-Central Tax replaces clause (d) of notification 50/2018-Central Tax, the one that names who must deduct tax at source. Any registered person receiving plastic waste and scrap from another registered person is now a deductor. The rate and the floor come from section 51 of the CGST Act itself, not from the notification: 1% central tax, matched by 1% state tax, where the total value of supply under a contract exceeds ₹2,50,000, counted excluding tax. Section 51 also carries a carve-out worth knowing. No deduction is made where the supplier's location and the place of supply sit in a State different from the State in which the recipient is registered.

The important thing about notification 06/2026 is what it replaced. The proviso it rewrote had been put there by notification 24/2024-Central Tax of 9 October 2024, and that one named metal scrap alone. Same for the reverse charge entry, last amended on 8 October 2024, and the TDS clause, last amended on 9 October 2024. Metal got all three in one week of October 2024. Plastic has now been added to the same three places.

What two years of metal scrap tells you

Plastic traders have an advantage metal traders did not. They can see what happened next.

When the metal rules landed, the complaint from the trade was never the rate. It was cash and paperwork. Reverse charge tax has to be paid in cash. A buyer cannot set it off against an input credit balance already sitting in the ledger, and the credit only comes back on the other side of the payment. On a margin of a few percent, money that leaves in one month and returns in the next is not a rounding error.

Put a number on it. A converter buying ₹10,00,000 of plastic scrap from an unregistered supplier now pays ₹1,80,000 of GST in cash on that purchase and claims it back as credit afterwards, subject to the usual conditions. (This is our own illustration, using the 18% Schedule II rate on a round purchase value. It assumes the supply is correctly classified under heading 3915 and ignores state-level variation.)

Compare the same ₹10,00,000 bought from a registered supplier. No reverse charge. The buyer deducts ₹20,000 as tax at source and pays it over, and the supplier claims that back in its own return. The buyer's cash position is better by a wide margin, and the compliance is a familiar monthly routine rather than a tax paid out of pocket on every lot.

A buyer looking at those two columns does not need a policy to tell it what to do.

The clause that decides the shape of the trade

Notification 04/2026-Central Tax, dated 26 October 2026, is the one to put in the diary. It amends the e-invoicing notification of 2020 so that e-invoicing covers not only outward supplies to registered persons and exports, but also supplies received from an unregistered person where the recipient pays tax under reverse charge, and imports of services. It comes into force on 1 January 2027.

In plain terms: a business already inside the e-invoicing net, which at present means those above ₹5 crore of aggregate turnover, will have to generate a self-invoice through the invoice registration portal for each purchase made from an unregistered supplier on which it pays reverse charge tax.

Think about what that means for a plastics recycler sourcing from fifty small collectors in a month. Fifty reverse charge self-invoices, each needing an invoice reference number. The tax on each may be reclaimable. The clerical cost of each is not.

This is the real mechanism, and it is worth naming for what it is. The tax system has not banned anyone from buying plastic scrap from an unregistered seller. It has simply made each such purchase carry its own administrative price tag, payable per transaction, by the buyer. The larger and more organised the buyer, the more sharply it will feel that per-transaction cost, and the more it will prefer suppliers who bring a GSTIN with them.

Why this works in your favour, not against you

If you sell plastic scrap and you have been operating without registration, the instinct is to read all this as a squeeze. For a small operator genuinely below the turnover threshold, nothing has changed in law, and nobody can tell you otherwise. But the commercial position has moved under your feet, and it will keep moving as 1 January 2027 approaches. Your buyer is about to start counting the cost of dealing with you. That cost is not your margin, your quality or your reliability. It is a cash outflow and a self-invoice that a registered competitor would not impose on them.

Which is the quiet opportunity in this. For years the registered plastic scrap trader carried compliance costs the unregistered one avoided, and competed against that disadvantage on price. These three notifications turn that around. From 1 November 2026, being registered is what makes you cheap to buy from. The GSTIN you may have treated as an overhead has become a selling point, and from 1 January 2027 it becomes a strong one.

If you sit in the middle of the chain, buying from many small sources and selling on to a few large ones, you feel this from both sides at once. On what you buy, you are now the one paying reverse charge in cash on every unregistered load, and from 1 January 2027 raising a self-invoice for each. On what you sell, 2% comes off the top of every contract above ₹2,50,000 before the money reaches you, to be recovered in your own return. The squeeze is real, and it rewards exactly one thing: a supplier base that is registered, with each load documented and each chemistry and heading correctly classified. The trader who can hand a buyer a clean invoice trail is about to be worth more than the one who can shave fifty paise a kilo.

The classification point deserves a line of its own. Heading 3915 is the hook on which all three rules hang. Get the heading wrong on an invoice and you have not avoided anything, you have created a dispute, and under reverse charge the dispute lands on the buyer.

What to do now

If you buy plastic scrap, check the GST status of every supplier on your books and sort them into registered and unregistered, because the two now cost you different amounts of cash for the same tonne, and work out what reverse charge on the unregistered share will do to a month of your working capital before the next buying cycle. Confirm with your accountant whether your turnover puts you inside the e-invoicing net, and if it does, ask your software provider now whether it can raise reverse charge self-invoices with an invoice reference number, rather than finding out in January. If you sell, establish whether your turnover crosses the registration threshold in your state, and remember that the exemption you may have relied on, the one for suppliers whose tax is paid entirely by the buyer, no longer covers plastic waste and scrap. Make sure heading 3915 appears correctly on every invoice, keep dated records of source and weight for each lot, and treat any contract above ₹2,50,000 as one where 2% will be withheld, so the cash reaches you late and your pricing should know it.

The bottom line

The rate on plastic scrap did not change. What changed is who hands the money to the government, when, and how much paperwork rides along. That is enough. By 1 January 2027 the cheapest plastic scrap supplier in India will be the one with a GSTIN, and the market will work the rest out on its own.