The GST Council has introduced new provisions regarding the treatment of metal scrap under the Goods and Services Tax (GST), effective 10th October 2024. This change, aimed at streamlining tax compliance, applies specifically to businesses dealing with scrap metal falling under various chapters of the Customs Tariff, which include iron, steel, copper, aluminum, and other base metals.
Categories of Metal Scrap Transactions
The new structure classifies transactions into different categories based on the registration status of both the buyer and supplier. Here’s a detailed breakdown:
| Supplier | Buyer | GST Rate | GST TDS |
|---|---|---|---|
| Unregistered | Unregistered Buyer | Exempt | No GST TDS |
| Unregistered | Registered Buyer | RCM @ 18% | No GST TDS |
| Registered | Unregistered Buyer | FCM @ 18% | No GST TDS |
| Registered | Registered Buyer | FCM @ 18% | GST TDS Apply |
- RCM (Reverse Charge Mechanism): When a registered buyer purchases from an unregistered supplier, the buyer is liable to pay tax under RCM at 18%.
- FCM (Forward Charge Mechanism): For transactions involving registered suppliers selling to registered or unregistered buyers, the tax is payable under FCM at 18%.
Metal Scrap Categories Covered
The provisions apply to metal scrap items covered under the following Customs Tariff Chapters:
- Chapter 72: Iron and Steel
- Chapter 73: Articles of Iron or Steel
- Chapter 74: Copper and Articles Thereof
- Chapter 75: Nickel and Articles Thereof
- Chapter 76: Aluminum and Articles Thereof
- Chapter 77: Reserved for Future Use
- Chapter 78: Lead and Articles Thereof
- Chapter 79: Zinc and Articles Thereof
- Chapter 80: Tin and Articles Thereof
- Chapter 81: Other Base Metals, Cermets, Articles Thereof
Registration Requirement
For metal scrap dealers, registration under GST is required based on the threshold of supply:
| Type of Goods | Below Threshold | Above Threshold |
|---|---|---|
| Metal Scrap | Not Required | Required |
| Other Goods | Not Required | Not Required |
Note: Registration is only required if the supply exceeds the prescribed threshold for metal scrap.
GST TDS Applicability
GST TDS needs to be deducted by the buyer under specific conditions:
- The GST TDS rate is 2% IGST or 1% CGST + 1% SGST of the taxable value.
- GST TDS is required at the time of payment or credit, whichever comes earlier.
- Threshold Limit: GST TDS applies when the contract value (excluding GST) exceeds ₹2.5 lakhs.
Key GST Return and Compliance Deadlines
- GST TDS Registration: Separate registration is required for deducting GST TDS.
- GST Return: Returns must be filed through GSTR-7, which is due by the 10th of the following month.
- Late Fee: ₹50/day (combined for CGST + SGST), with a maximum limit of ₹2000.
- Interest: Delayed payments attract an 18% per annum interest rate.
- Nil Return: No late fee applies for Nil filers.
Important Notes
- The new structure for metal scrap transactions came into effect on 10th October 2024.
- GST TDS is mandatory for buyers dealing with registered suppliers.
- Composite dealers are not eligible to claim Input Tax Credit (ITC) on taxes paid under RCM.
- A separate GST TDS registration is required for deducting TDS on GST payments.
This notification marks a significant change for businesses dealing with metal scrap. Compliance with these new provisions will be crucial for registered buyers and suppliers to avoid penalties and interest charges.
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