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

Since October 2024, metal scrap has had its own set of GST rules: reverse charge when bought from an unregistered seller, compulsory registration for sellers, and 2% GST TDS when bought from a registered seller. From 1 November 2026, the same rules apply to four more categories of goods.

The change was recommended at the 57th GST Council meeting on 8 October 2026 and notified through three CBIC notifications dated 27 October 2026. It affects many businesses that do not think of themselves as being in the scrap trade.

What is now covered

Who is affected

Both sides of the transaction are affected, so look at your purchases and your sales.

• Sellers: restaurants, hotels, caterers and food processors selling used cooking oil; offices and IT companies disposing of old computers and electronics; transport and logistics businesses selling worn tyres; manufacturers and contractors selling plastic packaging or production scrap.
• Buyers: recyclers, aggregators, biodiesel producers, tyre reprocessors and plastic processors, and any registered business that buys these goods for its own use.

1. Reverse charge on purchases from unregistered sellers

Notification No. 04/2026-Central Tax (Rate) adds the four new categories to the list of goods taxed under reverse charge (Notification No. 4/2017-Central Tax (Rate)). Where the seller is unregistered and the buyer is registered, the buyer pays the GST.

What to do (buyers):

• Identify vendors of these goods who do not hold a GSTIN.
• For each purchase, issue a self-invoice and a payment voucher, and pay the tax in cash through the electronic cash ledger. Reverse charge tax cannot be paid out of input tax credit.
• Claim input tax credit on the tax paid, in the same or a later return, where the goods are used in your business.

2. Sellers can no longer stay unregistered by relying on reverse charge

Normally, a person whose supplies are entirely under reverse charge is exempt from registration (Notification No. 5/2017-Central Tax). Notification No. 06/2026-Central Tax removes that exemption for sellers of all five categories, as was done for metal scrap in 2024.

This does not mean every seller must register. A seller must register when their aggregate turnover crosses the registration limit. In Telangana, the limit for suppliers of goods is ₹20 lakh, because the State did not adopt the higher ₹40 lakh limit. Aggregate turnover is counted across India for the same PAN and includes supplies taxed under reverse charge. Turnover from 1 April 2026 counts towards the limit, not only turnover from 1 November.

What to do (sellers): work out your aggregate turnover for the year so far. If you have crossed, or are close to, the limit, apply for registration now. Once you are registered, you charge GST on your invoices, and reverse charge no longer applies to your sales.

3. 2% GST TDS on purchases from registered sellers

Notification No. 07/2026-Central Tax (G.S.R. 935(E)) replaces clause (d) of Notification No. 50/2018-Central Tax. Any registered person who buys these goods from a registered seller must deduct GST TDS under section 51 of the CGST Act.

The ₹2.5 lakh limit is tested on the value of the contract, not on each invoice. A running purchase order for regular scrap pick-ups can cross the limit even if each invoice is small.

What to do (buyers): check whether you need a TDS registration, set up the deduction in your accounts payable process, and diary the GSTR-7 date. TDS for November 2026 is due by 10 December 2026.

What to do (sellers): expect to receive 2% less in cash from registered buyers on larger contracts. Check GSTR-7A and accept the credit so that you can use it to pay your GST.

4. Income tax TCS is a separate obligation

GST TDS is deducted by the buyer. Income tax TCS on scrap is collected by the seller. They are different obligations and both can apply to the same sale. Under section 394(1) of the Income-tax Act, 2025, the TCS rate on sale of scrap is 2% from 1 April 2026 (it was 1% under section 206C(1) of the 1961 Act).

What to do: sellers who are companies, firms or other specified persons should confirm that their billing system collects TCS at the new rate, and that the scrap ledger is included in the quarterly TCS return.

5. E-invoicing for reverse charge self-invoices from 1 January 2027

Notification No. 04/2026-Central Tax, dated 26 October 2026, extends e-invoicing to self-invoices for supplies received from unregistered persons under reverse charge, and to invoices for import of services. It applies from 1 January 2027 to registered persons whose aggregate turnover has exceeded ₹5 crore in any financial year from 2017-18.

For buyers of scrap from unregistered sellers, this means each self-invoice will need an IRN from the invoice registration portal. A self-invoice that is not reported this way is not a valid invoice, which puts the input tax credit at risk.

What to do: ask your ERP or GST software provider when reverse charge self-invoices will be supported, and test before 1 January 2027.

A checklist for this month

1. List every vendor and customer for the five categories of goods, with their GSTIN status.
2. Buyers: set up reverse charge for unregistered vendors, and TDS (with REG-07 registration) for registered vendors on contracts above ₹2.5 lakh.
3. Sellers: check your turnover against the ₹20 lakh limit in Telangana and register if required.
4. Review scrap disposal contracts and purchase orders so that the price, tax and deductions are clear.
5. Check income tax TCS at 2% on scrap sales.
6. Prepare for e-invoicing of reverse charge self-invoices from 1 January 2027.

Speak to us if you would like help reviewing your scrap purchases and sales, registering as a TDS deductor, or setting up the reverse charge process.

This article reflects the position as on 13 November 2026 and is for general information only. It is not professional advice. Please refer to the official notification or circular, or speak to us, before acting on it.