GST on Scrap Sales by Manufacturing Units: Checklist, Due Dates and Common Mistakes
Manufacturing units generate scrap that is sold to dealers. Scrap sales attract GST, and from October 2024 TDS on scrap was extended. This guide covers.DS applicability, invoicing and common errors.
GST Rates on Common Scrap Types
| Scrap Type | HSN | GST Rate |
|---|---|---|
| Ferrous scrap (iron and steel) | 7204 | 18% |
| Non-ferrous scrap (copper, aluminium) | 7404/7602 | 18% |
| Plastic waste/scrap | 3915 | 5% |
| Paper/cardboard waste | 4707 | 5% |
| Rubber scrap | 4004 | 5% |
| Electronic waste (e-waste) | 8549 | 18% |
| Textile waste | 6310 | 5% |
| Glass cullet | 7001 | 5% |
TDS on Metal Scrap Under GST (From October 2024)
Notification No. 25/2024-Central Tax (effective 10 October 2024) extended the GST TDS mechanism under Section 51 of the CGST Act to any registered person â not just government departments and PSUs â receiving supplies of metal scrap classified under Chapters 72â81 of the Customs Tariff Act from another registered supplier. The recipient must deduct 2% TDS where the taxable value of the contract exceeds âš2,50,000, obtain a separate GST TDS registration (Form REG-07), and the supplier receives TDS credit in their cash ledger.
RCM on Metal Scrap From Unregistered Suppliers (From October 2024)
Separately, Notification 06/2024-Central Tax (Rate) brought metal scrap supplied by an unregistered person to a registered recipient under reverse charge from 10 October 2024. In this scenario, the registered buyer (not a government/PSU-only rule) pays GST under RCM on the purchase and can claim ITC, similar to the commercial property RCM rule.
Section 206C TCS on Scrap (Income Tax)
Under Section 206C of the Income-tax Act, a seller of scrap must collect TCS at 1% from business buyers. This is an income tax provision, distinct from GST. From Tax Year 2026-27, this falls under new Act TCS provisions.
Common Compliance Mistakes to Avoid
- Using wrong HSN â metal scrap coded as finished goods â attracts scrutiny and rate disputes
- Not raising GST invoice for scrap sold to unregistered buyers â scrap sale is always taxable
- Forgetting to collect TCS under income tax Section 206C on scrap sales to business buyers
- Not reporting scrap sale separately in GSTR-1 with correct HSN and tax rate
- Treating scrap as exempt supply â scrap is always taxable at applicable rate