GST on Scrap from 1 November 2026: Reverse Charge, Registration and 2% TDS Explained

GST on Scrap from 1 November 2026: Reverse Charge, Registration and 2% TDS Explained

GST on scrap has changed. From 1 November 2026, three CBIC notifications dated 27 October 2026 take the rules that applied to metal scrap since October 2024 and extend them to four more items: used cooking oil, plastic waste and scrap, tyre waste and scrap, and electrical and electronic waste (e-waste). Purchases from unregistered persons now attract reverse charge (RCM). Suppliers can no longer rely on the registration exemption for RCM-only suppliers. Registered buyers must deduct 2% GST TDS when they buy these goods from registered suppliers above the contract threshold.

The changes follow the recommendations of the 57th GST Council meeting held on 8 October 2026. They affect recyclers, manufacturers, refineries and bio-diesel makers that buy scrap, and companies, hotels, restaurants and electronics businesses that sell it.

The three notifications at a glance

Matching IGST and UTGST notifications were issued on the same day.

Goods covered

For metal scrap, nothing changes in substance. Notification 06/2024-Central Tax (Rate) brought it under RCM, and Notifications 24/2024 and 25/2024-Central Tax handled registration and TDS in October 2024. The 2026 notifications rewrite those entries so that one list of five items applies across all three rules.

1. Reverse charge on purchases from unregistered suppliers

Notification 04/2026-Central Tax (Rate) inserts these entries in the RCM table:

• S. No. 2A: used cooking oil (1518)
• S. No. 3B: waste and scrap of plastics (3915)
• S. No. 3C: waste and scrap of tyres (4004)
• S. No. 9: electrical and electronics waste and scrap (8549)

In each case the supplier is "any unregistered person" and the recipient is "any registered person". The registered buyer pays the GST.

What this means for the buyer:

• Pay tax in cash. RCM tax is paid through the electronic cash ledger. It cannot be set off against ITC.
• Issue a self-invoice. Under Section 31(3)(f) of the CGST Act, the registered recipient issues an invoice for supplies received from an unregistered supplier. Rule 47A requires it within 30 days of receiving the goods.
• Issue a payment voucher under Section 31(3)(g) when paying the supplier.
• Claim ITC on the self-invoice after paying the tax, subject to Sections 16 and 17.
• Report correctly in GSTR-3B, with RCM liability and the matching ITC shown separately.

The GST rate on the goods is not changed by these notifications. Only the person liable to pay the tax changes.

2. Registration: the RCM-only exemption no longer helps scrap suppliers

Notification 5/2017-Central Tax exempts from registration persons who make only supplies on which the recipient pays tax under reverse charge. A small unregistered scrap collector selling only RCM supplies could rely on it.

Notification 06/2026-Central Tax substitutes the proviso to that notification. The exemption now does not apply to any person supplying used cooking oil, plastic scrap, tyre scrap, metal scrap or e-waste.

This does not mean every collector must register. The normal rules still decide:

• Turnover threshold (Section 22): a supplier must register once aggregate turnover crosses the threshold. For suppliers of goods only, this is ₹40 lakh in most States, with lower limits in some States.
• Inter-State supplies (Section 24): a person making inter-State taxable supplies of goods must register regardless of turnover.
• Timeline (Section 25(1)): a person who becomes liable must apply within 30 days.

What changes is that the RCM-only route no longer keeps a supplier above these limits out of the system. Buyers should expect more of their scrap and used-oil vendors to register over the coming months, and should update vendor masters as they do.

3. 2% GST TDS on purchases between registered persons

Notification 07/2026-Central Tax substitutes clause (d) of Notification 50/2018-Central Tax. Clause (d) now covers "any registered person receiving supply" of any of the five items "from another registered person". These buyers become deductors under Section 51.

How the deduction works

Worked example

A registered recycler in Maharashtra signs a ₹5,00,000 contract (excluding GST) to buy plastic scrap from a registered dealer in Maharashtra. The dealer charges GST as usual. The recycler deducts 1% CGST (₹5,000) and 1% SGST (₹5,000), a total of ₹10,000, and deposits it through GSTR-7. For deductions made in November 2026, GSTR-7 is due by 10 December 2026.

If the same recycler buys plastic scrap worth ₹80,000 from an unregistered collector, there is no TDS. The recycler pays GST on that purchase under reverse charge instead.

TDS registration in REG-07

When TDS on metal scrap started in October 2024, GSTN advised that buyers take a separate tax deductor registration in FORM GST REG-07. In Part B, Table 2, "Constitution of Business" is selected as "Others" and the nature of business is described in the text box. Buyers of the newly covered items should follow the same route. Apply early: the portal accepts GSTR-7 only from the month of registration, so a late registration creates a gap for deductions already made.

Who is affected and what to do

Compliance checklist

• Map every vendor and customer that deals in the five items, and record whether each is registered.
• Verify GSTIN status of scrap vendors, so the choice between RCM and TDS is correct.
• Apply for REG-07 if your business buys the covered items from registered suppliers.
• Track contract values so you know when the ₹2.5 lakh limit is crossed.
• Set up self-invoice and payment voucher numbering for RCM purchases.
• Configure ERP tax codes for RCM and for TDS at 1% + 1% or 2% IGST.
• File the first GSTR-7 for November 2026 deductions by 10 December 2026.
• Suppliers: check the cash ledger each month for TDS credits and accept them in time.

How Figment's products help

GSTCPC is Figment's GST compliance software for multi-GSTIN businesses. It supports GSTR-7 along with GSTR-1, GSTR-3B, GSTR-2A/2B, GSTR-6, GSTR-9 and GSTR-9C, and it reconciles GSTR-2B and IMS data with your purchase register, reporting ITC mismatches before GSTR-3B is filed. That helps when RCM self-invoices, ITC on reverse charge and TDS returns all need to agree.

VenCPC registers vendors using GSTIN, PAN or MSME data and checks the vendor's GSTIN during onboarding. For scrap buying, the vendor's registration status decides whether you pay tax under RCM or deduct TDS, so this check matters. Companies that want the same check inside their own ERP can use Figment's GST verification API.

Key takeaways

• From 1 November 2026, GST on scrap follows one set of rules for five items: used cooking oil, plastic scrap, tyre scrap, metal scrap and e-waste.
• Purchases from unregistered suppliers: the registered buyer pays GST under RCM, in cash, against a self-invoice.
• Suppliers of these items can no longer rely on the registration exemption for RCM-only suppliers.
• Purchases between registered persons: the buyer deducts 2% TDS on contracts above ₹2.5 lakh and files GSTR-7 by the 10th.
• Metal scrap was already covered in October 2024; the other four items are new.