GST on Metal Scrap: When the Buyer Pays the Tax and When 2% TDS Applies

Scrap moves through many hands: kabadiwalas, small yards, aggregators, traders and recyclers. Some are registered under GST and many are not. The GST Council's 54th meeting on 9 September 2024 recommended two changes to bring this trade into the tax net, and both took effect on 10 October 2024. Two years on, they still cause confusion about who pays what, and the reporting rules have tightened since.

Key rules at a glance

Which rule applies to your deal?

It depends on whether the seller and the buyer are registered.

"Metal scrap" here means scrap falling under Chapters 72 to 81 of the Customs Tariff, which covers iron and steel, copper, nickel, aluminium, lead, zinc, tin and other base metals.

Reverse charge: when the seller is unregistered

Under reverse charge, the registered buyer pays the GST to the government instead of the seller. The GST Council made two points clear when it recommended this. The buyer pays even if the seller's turnover is below the registration threshold, and the seller must still register once it crosses that threshold.

The buyer also has to issue an invoice to itself. Rule 47A requires this within 30 days of receiving the scrap. The GST paid under reverse charge can generally be claimed back as input tax credit, subject to the usual conditions.

An illustration (made-up numbers): an unregistered kabadiwala sells ferrous scrap worth ₹60,000 to a registered recycler. The recycler pays ₹10,800 of GST under reverse charge (18%, the rate for most metal scrap), issues a self-invoice within 30 days, and can claim the ₹10,800 as credit if the other conditions are met. The kabadiwala charges no GST.

TDS: when the seller is registered

When both sides are registered, the seller charges GST on its invoice as normal. The buyer then deducts tax at source from the payment if the total value of supply under the contract exceeds ₹2.5 lakh.

• The rate is 2%: 1% CGST plus 1% SGST within a state, or 2% IGST between states.
• It is worked out on the value before GST, not on the invoice total.
• The buyer must register separately as a TDS deductor (form GST REG-07), deposit the TDS within ten days after the month ends, and file the GSTR-7 return no later than the 10th of the month after the deduction.
• The seller sees the amount in its electronic cash ledger and can use it to pay its GST. A certificate in form GSTR-7A is generated on the portal.

An illustration (made-up numbers): a registered trader invoices a recycler for ₹5,00,000 of copper scrap plus ₹90,000 GST, a total of ₹5,90,000. The recycler deducts ₹10,000 (2% of ₹5,00,000), pays the trader ₹5,80,000 and deposits the ₹10,000 through GSTR-7. The trader still owes its full ₹90,000 of GST, but the ₹10,000 now sitting in its cash ledger counts towards it.

TDS is not an extra tax. It is an advance payment of the seller's own GST, collected by the buyer.

One exception: there is no TDS when the seller is located, and the supply takes place, outside the state in which the buyer holds its registration.

If a buyer deducts TDS but does not pay it to the government, interest applies under Section 50, and the amount can be recovered through a demand.

What has changed since 2024

GSTR-7 is now filed invoice by invoice. From the September 2025 return period, deductors must report TDS against each invoice in GSTR-7, not as a monthly total. For scrap buyers with many suppliers, this means keeping the invoice number, date, value and TDS amount for every purchase where tax was deducted.

The GST rate on scrap stayed at 18%. The rate overhaul that took effect on 22 September 2025 kept most metal scrap, including iron and steel, copper and aluminium scrap, at 18%.

Checklist

For registered buyers of scrap:

• check each supplier's GST registration before buying, because it decides whether you pay reverse charge or deduct TDS;
• for unregistered suppliers, pay GST under reverse charge and issue the self-invoice within 30 days;
• for registered suppliers, take TDS registration, deduct 2% on contracts above ₹2.5 lakh, and file GSTR-7 invoice-wise by the 10th;
• keep weighbridge slips, e-way bills and bank payment records for every deal.

For scrap sellers:

• if you are registered, check the TDS credit in your electronic cash ledger every month and match it with your invoices;
• if you are unregistered, register once your turnover crosses the threshold;
• if you are registered and sell to registered buyers, expect them to ask for your GSTIN and to deduct TDS on larger deals, so keep your returns up to date.

The bottom line

Every metal scrap purchase by a registered business now leaves a GST trail: reverse charge when the seller is unregistered, TDS when the seller is registered and the deal is large enough. The buyer carries most of the paperwork, so buyers who check registrations, file on time and keep records will have the fewest surprises.

Law referred

• CGST Act, 2017: Section 51
• CGST Rules, 2017: Rule 66; Rule 47A, inserted by Notification 20/2024-Central Tax
• Notification 06/2024-Central Tax (Rate), dated 8 October 2024 (reverse charge on metal scrap)
• Notification 25/2024-Central Tax, dated 9 October 2024 (TDS on metal scrap)
• Notification 09/2025-Central Tax, dated 11 February 2025 (commencement of amended return rules, including GSTR-7)
• Press release, 54th GST Council meeting, 9 September 2024

General information based on the CGST Act, the CGST Rules and the notifications above, as checked on 6 October 2026. Not legal or tax advice; for your specific transactions, consult a chartered accountant or GST professional.