Scrap: the two obligations that arrived in October 2024

Short answer: from 10 October 2024, a registered buyer of metal scrap pays GST under reverse charge when the supplier is unregistered, and deducts 2% GST TDS when the supplier is registered and the contract crosses the threshold. Both obligations landed on the buyer, and both are easy to miss because scrap was never a line anyone watched.

Why scrap got singled out

Scrap trading has a long history of leakage: fragmented, cash-heavy, with unregistered intermediaries between the generator and the consumer. Credit was being claimed downstream against tax that had not reliably been paid upstream.

The response follows a now-familiar pattern — move the obligation to the person who is registered, visible, and has something to lose. In this trade that is almost always the buyer.

Obligation one: reverse charge on unregistered purchases

A registered person receiving metal scrap from an unregistered supplier pays the tax under reverse charge.

Practical consequences:

• The tax is paid in cash, not set off against existing credit, and the credit is taken afterwards.
• The threshold exemption does not shelter you. A person required to pay under reverse charge is required to be registered, so a buyer relying on being under the turnover threshold should establish that position rather than assume it.
• It applies transaction by transaction. There is no de minimis for occasional purchases from an unregistered yard.

For a manufacturer who buys scrap as raw material — foundries, re-rollers, smelters — this is a live monthly obligation, not an edge case.

Obligation two: 2% TDS on registered purchases

Where the supplier is registered, the buyer instead deducts GST TDS at 2% of the taxable value, where the contract value exceeds the prescribed threshold.

This is the one that catches manufacturers who think of themselves as scrap sellers rather than buyers, because it converts an ordinary purchase into a compliance obligation:

• Registration as a deductor, which is distinct from ordinary registration.
• Deduct, deposit and report within the prescribed timelines.
• Issue the certificate the supplier needs to claim the credit.

Late deposit carries interest, and a supplier who cannot see the credit will chase you for it.

The decision tree

The single most useful control is capturing and re-verifying supplier registration status, because the entire treatment flips on it — and registrations get cancelled without the buyer being told.

What is actually covered

The provisions apply to metal scrap within the specified tariff headings — broadly ferrous and non-ferrous metal waste and scrap.

That means classification decides applicability. Two consequences:

• Non-metal scrap — plastic, paper, packaging, wood — is outside these provisions, though the sale remains taxable in the ordinary way.
• Describing a consignment loosely as "scrap" on the invoice does not settle anything. What matters is the tariff heading of what actually moved.

Selling your own production scrap

Worth stating plainly, because it is a recurring question: sale of scrap is a supply and is taxable, whenever and however the underlying material was acquired. There is no relief for scrap arising from inputs bought years ago, and clearing an obsolete-material yard is a supply like any other.

For a seller, the practical change is simply that registered buyers will withhold 2%, which is claimed as credit rather than lost.

Checklist

1. Is supplier registration status captured at purchase — and re-verified?
2. Where suppliers are unregistered, is reverse charge being paid in cash and credit taken?
3. Is your registration position correct given reverse-charge liability?
4. Are you registered as a deductor where 2% TDS applies?
5. Is scrap correctly classified by tariff heading, not by description?
6. Is scrap sale being reported as a supply rather than netted against purchases?

This is a working reference, not the statute. For anything you are relying on, confirm the notification and tariff entries directly.