TDS on Metal Scrap: Clause (d) and the Council History

TDS on Metal Scrap explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

In October 2024 GST TDS stopped being a government-sector subject. A new clause (d) brought ordinary businesses into section 51 — every registered person buying metal scrap from another registered person — and it arrived alongside a reverse charge that catches the other half of the trade.

Notification No. 25/2024-Central Tax dated 09.10.2024, w.e.f. 10.10.2024, inserted clause (d) into the section 51 deductor notification: "any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule to the Customs Tariff Act, 1975, from another registered person." Deduction is at 2% where the contract value exceeds ₹2.5 lakh. A day earlier, Notification No. 06/2024-CT(Rate) dated 08.10.2024 had put unregistered-to-registered metal scrap supplies under reverse charge from the same date. Together they cover both halves of the trade.

Why the Council acted

The Handbook sets out the problem in the sector's own terms: scrap "serves as a critical raw material for industries such as steel manufacturing, aluminium smelting, foundries, metal recycling units", but the trade "has historically been characterised by a large number of small and unregistered dealers, fragmented supply chains, cash transactions and frequent instances of fake invoicing and ITC fraud."

Three Council meetings across three years produced the answer.

45th meeting — 17 September 2021, Lucknow. Industry sought a rate cut from 18% to 5%; the Fitment Committee did not recommend it because metal scrap "involves significant imports and a very large revenue base, making a rate reduction undesirable", and the Council retained 18%. It also examined "complaints about fake invoicing and non-payment of tax by scrap dealers, which resulted in denial of ITC to manufacturers purchasing scrap", and stakeholders suggested RCM. The matter was referred for further examination, the trade involving multiple intermediaries.

47th meeting — 28–29 June 2022, Chandigarh. The rate reduction was again not accepted; 18% retained. On RCM, the Fitment Committee highlighted that "scrap transactions often pass through several intermediaries and aggregation stages, which could create practical and compliance issues if reverse charge is applied widely." No RCM at that stage.

54th meeting — 9 September 2024, New Delhi. The Committee recommended RCM on supply of metal scrap by an unregistered person to a registered person, with the condition that "the supplier must obtain registration once the threshold limit is crossed and the recipient must pay tax under RCM even if the supplier is below the threshold." And it approved TDS at 2% (1% CGST + 1% SGST) on B2B supply of metal scrap by registered persons "to improve traceability of transactions and tax collection." Some States sought a 5% rate and mandatory e-way bills for all scrap transactions; the Council retained 18%, approved RCM and TDS, and directed the Fitment Committee to examine mandatory e-way bills further.

The resulting grid

As the Handbook puts it: "This dual structure ensures that both organised and unorganised segments of the scrap market are brought within the GST compliance net."

Note the symmetry. TDS and RCM are mutually exclusive — a supply is never subject to both. And the unregistered buyer is outside both, since it has no GSTIN to deduct with.

What "metal scrap" means here

Chapters 72 to 81 of the Customs Tariff Act, 1975:

Commonly used HSN codes: 7204 ferrous waste and scrap (iron or steel) · 7404 copper waste and scrap · 7602 aluminium waste and scrap · 7802 lead waste and scrap · 7902 zinc waste and scrap · 8002 tin waste and scrap.

No relief for government bodies

The third proviso to Notification No. 50/2018 was replaced to read: "Nothing in this notification shall apply to the supply of goods or services or both, which takes place between one person to another person specified under clauses (a), (b), (c), and (d) of sub-section (1) of Section 51, except the person referred to in clause (d) of this notification."

Two effects, as the Handbook states them:

• "Supplies between entities already specified under section 51(1) clauses (a), (b), and (c) (such as government bodies and local authorities) are exempt from TDS."
• "However, supplies involving metal scrap dealers under clause (d) are explicitly not exempt and continue to attract TDS. However, if any of these entities, when registered, and receives supply of Metal Scrap from another registered person, TDS provisions shall be applicable on such supply."

So a government department or PSU buying metal scrap from a registered supplier deducts, even though it would not deduct on any other supply from the same person.

Registration and reporting mechanics

Compulsory registration follows. "any person who becomes liable to deduct TDS pursuant to this notification is required to obtain compulsory registration under section 24(vi)." No threshold applies.

The REG-07 quirk. Per a GSTN advisory on REG-07 dated 22 October 2024: such taxpayers must select "Others" in Part B of Table 2 under "Constitution of Business", which opens a text box in which they must enter "Metal Scrap Dealers" — a mandatory field for anyone selecting "Others". The rest of REG-07 is then completed and submitted.

The transitional reporting instruction. By a GSTN advisory dated 26 November 2024, "taxpayers who were granted registration in November 2024, but who had deducted TDS in October 2024, are required to report the consolidated amount of TDS deducted for the period from 10.10.2024 to 30.11.2024 in the GSTR-7 return to be filed for the month November 2024."

That advisory exists because the obligation began before registrations could be granted. A scrap buyer that deducted from 10 October but was only registered in November had no return in which to report the October deductions until GSTN said so.

And the supplier side changed too. The registration relief in Notification No. 5/2017-Central Tax — for persons whose entire outward supply bears tax under section 9(3) — was withdrawn for metal scrap suppliers by Notification No. 24/2024-Central Tax dated 09.10.2024, so "any person exclusively engaged in the supply of metal scrap will not be exempted from registration." Metal scrap under reverse charge →

Key takeaways

• Clause (d), inserted by Notification No. 25/2024-CT w.e.f. 10.10.2024, makes every registered buyer of metal scrap from a registered seller a TDS deductor.
• Rate 2%, threshold ₹2.5 lakh per contract, on taxable value excluding GST.
• RCM covers the unregistered-to-registered leg — Notification No. 06/2024-CT(Rate) — so the two mechanisms are mutually exclusive.
• The Council retained 18% on metal scrap at the 45th, 47th and 54th meetings, and the 54th approved both RCM and 2% TDS.
• Mandatory e-way bills for scrap were referred back to the Fitment Committee.
• Chapters 72 to 81; common codes 7204, 7404, 7602, 7802, 7902, 8002.
• The inter-government TDS relief does not apply to metal scrap — a department or PSU buying scrap deducts.
• Section 24(vi) compels registration; REG-07 requires "Others" + "Metal Scrap Dealers"; October 2024 deductions were reported in the November 2024 GSTR-7.

Read next

• Section 51: Who Must Deduct TDS, and the ₹2.5 Lakh Threshold
• Metal Scrap Under Reverse Charge: Entry 8 and the Three Notifications of October 2024
• GSTR-7: Tables 3 and 4, and the 2025 Changes

Disclaimer: Positions stated as on 5 September 2026, based on section 51 read with section 24(vi) of the CGST Act, 2017, Notification Nos. 50/2018, 24/2024 and 25/2024-Central Tax, Notification No. 06/2024-Central Tax (Rate), the minutes of the 45th, 47th and 54th GST Council meetings and the GSTN advisories dated 22 October 2024 and 26 November 2024, as reproduced in the ICAI Handbook on Government Supplies under GST (Including TDS Provisions), updated to 15 April 2026.