GST on Waste and Scrap: What Has Been Recommended?
The 57th GST Council meeting, held on 8 October 2026, recommended introducing a 2% Tax Deducted at Source (TDS) mechanism and a Reverse Charge Mechanism (RCM) for specified categories of waste and scrap.
The proposed changes cover:
-
Waste and scrap of plastics.
-
Waste and scrap of tyres.
-
Electrical and electronic waste and scrap.
-
Used cooking oil.
The recommendations follow a mechanism similar to the existing TDS and RCM framework for metal scrap.
The objective is to improve tax compliance and traceability in transactions involving specified waste and scrap.
Important: These changes are Council recommendations. The relevant notifications and implementation date must be verified before treating them as effective law.
1. When Would 2% TDS Apply?
Under the proposed mechanism, TDS at 2% would apply when a registered person supplies the specified waste or scrap to another registered person.
In such transactions, the registered buyer would be required to deduct 2% from the payment made to the supplier and deposit the deducted amount with the Government, subject to the applicable provisions.
Example
Suppose a registered scrap dealer sells specified plastic scrap to another registered business for ₹1,00,000.
For illustration, TDS at 2% on ₹1,00,000 would be ₹2,000.
The buyer would deduct ₹2,000 from the payment and deposit it with the Government under the prescribed procedure.
This example illustrates the proposed rate and does not address any other tax, valuation or statutory issue that may apply to the transaction.
2. When Would Reverse Charge Mechanism Apply?
The Council also recommended RCM on specified waste and scrap supplied by an unregistered person to a registered person.
Under this proposed arrangement, the registered recipient would be responsible for paying the applicable GST under reverse charge instead of the unregistered supplier paying tax on that supply.
The Council's FAQ specifically states that the recipient would remain liable to pay GST under RCM even if the unregistered supplier is below the applicable GST registration threshold.
Example
A registered recycling company purchases specified electronic waste from an unregistered supplier.
If the proposed RCM provision is implemented as recommended, the registered recycling company would be responsible for paying GST under reverse charge on that purchase, subject to the applicable provisions.
The supplier's turnover being below the registration threshold would not, by itself, remove the recipient's proposed RCM liability.
3. Does the Unregistered Supplier Need to Obtain GST Registration?
The Council's FAQ explains that the supplier would be required to obtain GST registration when aggregate turnover crosses the threshold prescribed under Section 22 of the CGST Act, 2017.
Once registration is required and obtained, the relevant TDS provisions would apply to subsequent supplies covered by the prescribed mechanism.
The recipient's proposed RCM obligation on a qualifying purchase from an unregistered supplier is a separate compliance requirement.
4. What Are the Compliance Responsibilities of the Registered Buyer?
Depending on whether the supplier is registered or unregistered, the buyer may have different responsibilities under the proposed framework.
Purchases from Registered Suppliers
For specified waste and scrap purchased from registered suppliers, the proposed obligations include:
-
Deducting TDS at 2%, subject to the applicable provisions.
-
Depositing the deducted amount with the Government.
-
Filing the prescribed TDS return in FORM GSTR-7.
-
Issuing the prescribed TDS certificate to the supplier.
Purchases from Unregistered Suppliers
For qualifying purchases from unregistered suppliers, the proposed obligations include:
-
Paying GST under RCM.
-
Reporting the transaction and tax liability in the applicable GST return.
-
Maintaining purchase invoices or other prescribed supporting documents and payment records.
The precise compliance procedure will depend on the final notifications, rules and portal instructions.
5. Is This Mechanism Similar to the Existing Metal Scrap Rules?
Yes. The Council's FAQ states that the proposed mechanism is modelled on the TDS and RCM framework already applicable to specified metal scrap transactions following the recommendations of the 54th GST Council meeting.
The proposed expansion would bring additional categories of waste and scrap within a similar compliance framework.
However, businesses should not automatically apply every provision governing metal scrap to these additional categories. The final notifications and applicable provisions for each category must be examined.
6. What Should Scrap Dealers and Recycling Businesses Do?
Businesses dealing in plastic scrap, tyre scrap, electrical and electronic waste, or used cooking oil should prepare to review their purchase and sales processes.
Recommended steps include:
-
Classify transactions accurately and confirm whether the goods fall within the specified categories.
-
Verify the GST registration status of suppliers and buyers.
-
Review the proposed TDS and RCM requirements separately.
-
Maintain purchase invoices, sales invoices and payment records.
-
Review accounting and GST software settings for the proposed changes.
-
Monitor official notifications and implementation instructions before applying the new mechanism.
Conclusion
The GST Council has recommended introducing 2% TDS on specified waste and scrap supplies between registered persons and RCM on qualifying supplies from unregistered persons to registered buyers.
If implemented as recommended, these measures could increase compliance requirements for scrap dealers, recyclers and businesses purchasing the specified materials.
Businesses should distinguish between the proposed changes and the existing metal scrap framework, and verify the relevant legal notifications before implementing the new procedures.
Source: Ministry of Finance, Government of India — FAQs on issues related to goods, issued in connection with the recommendations of the 57th GST Council meeting held on 8 October 2026.