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New TDS provisions under GST for Metal Scrap

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Summary of the GSTN Notification No. 25/2024-CT on TDS for Metal Scrap under GST : 

On October 9, 2024, the government issued Notification No. 25/2024-CT, introducing TDS compliance for the supply of metal scrap under the GST framework, effective from October 10, 2024.

Key Points of TDS @2% on Metal Scrap Purchases

  1. Applicability of TDS @2% on Metal Scrap Purchases
    • TDS at 2% (split as CGST 1% and SGST 1% or IGST 2%) is to be deducted on purchases of metal scrap from registered suppliers in B2B transactions.
    • Applicable only when the supply value of scrap goods exceeds ₹2.5 lakhs.
  2. Calculation Basis: TDS should be calculated on the value of supply (excluding CGST, SGST, IGST, UTGST, and TCS under Income Tax). The deducted TDS will reflect in the supplier’s GSTR-2A and, upon filing, will be credited to their electronic cash ledger.
  3. Return and Filing: Buyers deducting TDS must file Form GSTR-7 by the 10th of the following month, along with payment of TDS liability. GSTR-7A acts as a TDS certificate for the supplier, similar to Form 16A under Income Tax.
  4. Claiming TDS: Suppliers can claim the TDS credit monthly as it reflects in their Cash Ledger and can be used for tax payments or refunded immediately. The deductor is required to file a monthly TDS return in Form GSTR-7.  TDS certificates are issued to suppliers (deductees) in Form GSTR-7A.
  5. Registration: Buyers must register separately for TDS under GST using Form REG-07. Required documents include the DDO/Tax Deductor’s  PAN, Aadhar, and proof of business premises. Per the advisory dated October 22, 2024, taxpayers must select “Others” under the “Constitution of Business” and specify “Metal Scrap Dealers.”
  6. Effective Date: The TDS on metal scrap is applicable from October 10, 2024.
  7. Inter-Branch Transactions: TDS also applies to inter-branch sales and purchases of scrap.
  8. Exceptions: TDS under GST is not applicable to:
    • Imports of metal scrap.
    • Purchases from unregistered persons (subject to RCM @18% instead).
  9. Applicable Chapters: The provision applies to metal scraps under Chapters 72-81 of the Customs Tariff Act, covering iron, steel, copper, nickel, aluminum, lead, zinc, tin, and other base metals.

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