GST Council proposes 2% TDS on scrap deals

NEW DELHI: The 57th Goods and services tax (GST) Council has proposed a 2% tax deducted at source (TDS) on specified waste and scrap transactions between registered businesses and reverse charge mechanism (RCM) on purchases from unregistered suppliers, tightening tax compliance across the recycling chain.

The proposed levy covers plastic waste, discarded tyres, electrical and electronic scrap, and used cooking oil. Under the framework, registered buyers will have to deduct TDS when purchasing from registered suppliers and pay GST under RCM on purchases from unregistered sellers, even when the latter fall below the GST registration threshold.

The recommendations, detailed in a frequently asked questions (FAQs) issued on Friday by the finance ministry, follow the compliance framework introduced for metal scrap after the 54th GST Council meeting. The changes are aimed at bringing specified waste streams under a similar tax-monitoring mechanism.


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The Council has also clarified the tax treatment of several products to settle classification disputes. Seaweed-extract biostimulants registered under the Fertiliser Control Order, 1985, will be classified as fertilisers under HSN heading 3101, while products containing plant growth regulators will not qualify for the concession. Sublimation paper has been classified under heading 4809.

In another clarification relevant to the automobile trade, second-hand car dealers can avail the concessional GST margin scheme while claiming input tax credit on eligible business inputs such as repair and maintenance services and spare parts. However, ITC on the purchase of the second-hand vehicles themselves is not permitted if the margin scheme is used.

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The Council has also recommended aligning the GST treatment of retreaded tractor tyres with that of new tractor tyres, clarifying that toy-related rate entries cover other products under Customs Tariff heading 9503, including dolls and puzzles, and creating a separate nil-rate entry for psyllium seeds, irrespective of whether they are fresh, chilled, frozen or dried.

Past disputes involving eligible seaweed-based biostimulants and sublimation paper are proposed to be regularised on an "as is where is" basis.