📌 Background – Why This Change Is Important

The GST law has introduced a significant compliance requirement impacting the metal scrap industry.

Vide Notification No. 25/2024 – Central Tax dated 09.10.2024, issued under Section 51 of the CGST Act, 2017, the Government has expanded the scope of GST TDS to cover:

Any registered person receiving supplies of metal scrap (Chapters 72 to 81 of the Customs Tariff Act, 1975) from another registered person.

This effectively means that registered scrap buyers are now required to deduct TDS under GST, subject to prescribed conditions.

The clarification is also discussed in the Background Material on GST (January 2025 Edition) issued by the GST & Indirect Taxes Committee of ICAI.

⚖️ Legal Provision – Section 51 of CGST Act

Section 51 empowers the Government to mandate Tax Deduction at Source (TDS) on specified supplies.

With the latest notification, the scrap sector has been specifically brought under this framework.

🔍 When Does GST TDS Apply to Scrap Transactions?

TDS under GST will apply only when all of the following conditions are satisfied:

✔ Buyer is a registered person under GST
✔ Seller is a registered person under GST
✔ Goods supplied are metal scrap falling under Chapters 72–81
✔ Supply is taxable (not exempt)
✔ Value of supply under a contract exceeds ₹2.5 lakh (excluding GST)

If even one condition is not satisfied, TDS does not apply.

📊 Applicability Matrix (Clearly Explained)

👉 Key Insight:
TDS applies only in Registered-to-Registered scrap transactions.

💰 What Is the GST TDS Rate?

As per Section 51:

• 1% CGST + 1% SGST (Intra-State supply)

• 2% IGST (Inter-State supply)

⚠ TDS is calculated on the taxable value only, excluding GST.

🧮 Practical Illustration

Suppose a registered scrap buyer purchases:

• Scrap Value: ₹1,00,000

• GST @18%: ₹18,000

• Invoice Value: ₹1,18,000

TDS calculation:

• TDS @2% on ₹1,00,000 = ₹2,000

Buyer will:

• Pay supplier: ₹1,16,000

• Deposit ₹2,000 as GST TDS

The supplier can claim this amount in their electronic cash ledger.

🚨 Important Clarifications for Scrap Buyers

✔ TDS does not apply on exempt scrap supplies
✔ TDS does not apply where location of supplier and place of supply are in a different State from buyer’s registration State
✔ Threshold of ₹2.5 lakh applies per contract, not per invoice

Understanding these nuances prevents unnecessary deduction.

📋 Compliance Responsibilities of Scrap Buyers

If you are a registered scrap buyer covered under this provision, you must:

1️⃣ Obtain GST TDS Registration (separate registration under Section 24, if applicable)
2️⃣ Deduct TDS at the time of payment or credit, whichever is earlier
3️⃣ Deposit TDS within 10 days from end of the month
4️⃣ File GSTR-7 (TDS Return)
5️⃣ Issue TDS Certificate (Form GSTR-7A)

Non-compliance may attract:

• Interest under Section 50

• Late fee

• Penalty under Section 122

🧠 Practical Industry Insight

The scrap industry often works on:

• Rolling contracts

• Multiple small invoices

• Frequent supply cycles

Businesses must carefully examine whether:

• The ₹2.5 lakh threshold is crossed at contract level

• Proper vendor classification exists

• Accounting software supports automatic TDS deduction

Improper handling may result in disputes with suppliers.

⚠ Common Mistakes Scrap Dealers May Make

❌ Ignoring TDS applicability assuming it applies only to Government departments
❌ Deducting TDS on GST amount (incorrect)
❌ Not verifying whether scrap falls under Chapters 72–81
❌ Missing monthly TDS deposit deadline

These errors can lead to avoidable penalties.

🏁 Key Takeaway

If you are a registered scrap buyer purchasing metal scrap from another registered supplier, GST TDS provisions are now applicable — subject to ₹2.5 lakh contract threshold and taxable supply condition.

Immediate review of procurement contracts and accounting systems is advisable to ensure compliance.

📞 Professional Note

Scrap dealers and buyers should proactively review their contractual arrangements and GST processes to avoid interest and penalty exposure under Section 51.