GST on scrap and waste from 1 November 2026: reverse charge, 2% TDS and registration

The scrap and recycling trade has long been a problem area for GST – fake invoices, unregistered suppliers and input tax credit passed on without tax being paid. In October 2024 the government tackled metal scrap with reverse charge and 2% GST TDS. From 1 November 2026 the same approach has been extended to four more categories of waste.

Three notifications dated 27 October 2026 make the change. If you run a recycling unit, a scrap trading business or a factory that buys scrap – for example in the Narela, Bawana or Mundka industrial areas – these rules apply to your purchases from this month.

At a glance

1. Reverse charge on scrap from unregistered suppliers

Notification 04/2026-Central Tax (Rate) amends the reverse charge list (Notification 4/2017-Central Tax (Rate)) with effect from 1 November 2026. The goods added are:

• Used cooking oil (heading 1518)
• Waste and scrap of plastics (heading 3915)
• Waste and scrap of tyres (heading 4004)
• Electrical and electronic waste and scrap (heading 8549)

Metal scrap of Chapters 72 to 81 has been under reverse charge since 10 October 2024 (Notification 06/2024-Central Tax (Rate)). Reverse charge applies where the supplier is unregistered and the buyer is registered. The buyer issues a self-invoice, pays the tax in cash through the electronic cash ledger (input tax credit cannot be used to pay RCM), and can then claim it as ITC if otherwise eligible. Purchases from registered suppliers stay under the normal forward charge.

2. 2% GST TDS on purchases from registered suppliers

Notification 07/2026-Central Tax substitutes clause (d) of Notification 50/2018-Central Tax, so GST TDS under Section 51 now covers all five categories:

• Who deducts – any registered person receiving these goods from a registered supplier.
• Threshold – total value of supply under the contract exceeds ₹2.5 lakh, excluding GST.
• Rate – 1% CGST + 1% SGST/UTGST for intra-state supplies, or 2% IGST for inter-state supplies, on the taxable value.
• Exception – no deduction where the supplier's location and the place of supply are in a different state or union territory from the buyer's registration.
• Registration and return – the buyer needs a separate GST TDS registration (REG-07), unless already registered as a deductor for metal scrap, and files GSTR-7 with payment by the 10th of the next month.
• Supplier – the TDS appears in the supplier's electronic cash ledger and can be used to pay GST.

Example: a Bawana plastics unit buys plastic scrap from a registered Delhi dealer under a contract for ₹3,00,000 plus GST in November 2026. TDS = 2% × ₹3,00,000 = ₹6,000 (₹3,000 CGST + ₹3,000 SGST). The unit pays the dealer the invoice value less ₹6,000, deposits ₹6,000 and files GSTR-7 by 10 December 2026. If the contract were for ₹2,40,000, no TDS would apply.

3. Registration for scrap suppliers

Notification 5/2017-Central Tax exempts persons who make only reverse-charge supplies from registering. Metal scrap was taken out of that exemption in October 2024 (Notification 24/2024-Central Tax). Notification 06/2026-Central Tax now does the same for used cooking oil, plastic, tyre and e-waste scrap.

• This does not force every kabadiwala to register. The normal threshold under Section 22 applies – generally ₹40 lakh for suppliers of goods, lower in some special category states.
• Sales taxed under reverse charge count towards that turnover, including turnover from April 2026 onwards.
• Once over the limit, apply for registration within 30 days. Buyers who are registered will increasingly prefer registered suppliers, because purchases from them are cleaner for audit and ITC.

Our GST registration service covers the new REG-01 checks explained in our post on GST changes from 1 November 2026.

4. E-invoicing of reverse charge self-invoices from 1 January 2027

Notification 04/2026-Central Tax extends e-invoicing to self-invoices raised for supplies received from unregistered persons under reverse charge and to import of services, for taxpayers whose aggregate turnover has exceeded ₹5 crore in any financial year from 2017-18. It takes effect from 1 January 2027. Large scrap buyers should check that their software can generate an IRN for self-invoices before then.

Checklist for scrap buyers and sellers

• Classify every scrap purchase by HSN and confirm the GST rate from the rate schedule before raising the self-invoice.
• Check each supplier's GSTIN status on the portal; treat unregistered suppliers under RCM and pay in cash.
• For registered suppliers, track contract values; deduct 2% TDS where the contract exceeds ₹2.5 lakh.
• Apply for GST TDS registration now if you do not have one, so the first GSTR-7 is not late.
• Suppliers: monitor turnover against the registration threshold and reconcile TDS credits in the cash ledger.
• Keep weighbridge slips, e-way bills and transport proof – scrap transactions are a focus area for audits and GST notices.

How we help

CA Dilbagh Singh works with manufacturers and traders in Delhi's industrial areas on GST registration, RCM and TDS compliance, GSTR-7 filing and replies to notices. See our page for businesses in Narela and Bawana industrial area.

General information as on 9 November 2026, based on Notifications 04/2026-Central Tax (Rate), 04/2026-Central Tax, 06/2026-Central Tax and 07/2026-Central Tax as reported. GST rates differ by item; check the rate schedule for your goods. Facts of each case differ; take professional advice before acting.

Frequently asked questions