GST on Metal Scrap: Key Updates from October 2024

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Definition of Metal Scrap
Metal scrap covers items classified under Chapters 72, 73, 74, and 75 of the GST framework, including iron, steel, copper, aluminum, zinc, and other base metal articles. However, new items or jewelry are excluded from this category.

Reverse Charge Mechanism (RCM)

  • When both buyer and supplier are unregistered: No GST applies.
  • When an unregistered supplier sells to a registered buyer: The buyer pays 18% GST under RCM.

GST TDS (Tax Deducted at Source)

  • Applicability: When a registered buyer purchases from a registered seller.
  • TDS Rate: 2% (1% CGST + 1% SGST or 2% IGST).
  • Threshold Limit: TDS applies only if the contract value exceeds ₹2.5 lakhs.
  • Deduction Rule: TDS is deducted from the taxable amount before payment.

Separate TDS Registration
Scrap dealers must obtain a separate GST registration specifically for TDS purposes.

ITC (Input Tax Credit) on RCM Payments
Composite dealers are not eligible to claim ITC on payments made under RCM.

Important Dates and Compliance Impact
The changes take effect from 10th October 2024. Registered buyers are required to file GSTR-7 and make timely payments to avoid late fees and penalties.

Noteworthy Change to RCM Registration
Previously, RCM providers were exempt from registration regardless of turnover. Under the new rules, registration becomes mandatory if the provider’s turnover exceeds ₹20 lakh or ₹40 lakh, depending on the applicable threshold.

Ensure Compliance
These updates significantly impact businesses dealing in metal scrap. It’s essential to review your GST practices to stay compliant with the new regulations.


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