GST TDS on Sale of Metal Scrap W.E.F 10.10.2024
Published on October 10, 2024
Nidhi Gupta
Senior Tax Consultant
Comprehensive guide to the new GST TDS provisions for metal scrap transactions introduced by CBIC Notification No. 25/2024-CT effective October 10, 2024
The Central Board of Indirect Taxes and Customs (CBIC) announced a pivotal update to GST regulations on October 9, 2024, with Notification No. 25/2024-CT. The notification introduces a Tax Deduction at Source (TDS) mechanism for metal scrap transactions under the GST framework, effective from October 10, 2024.
Overview of the TDS Mechanism
1. Applicability and Scope
- Rate of TDS: A TDS rate of 2% is mandated (split as CGST 1% and SGST 1%, or IGST 2% for inter-state transactions).
- Transaction Value Threshold: TDS applies only to transactions exceeding a taxable value of ₹2.5 lakhs.
- Eligible Transactions: Applicable exclusively to B2B purchases of metal scrap from registered suppliers.
2. Basis for TDS Calculation
- TDS is calculated on the value of supply, excluding taxes such as CGST, SGST, IGST, UTGST, and TCS under Income Tax.
- The deducted TDS amount will automatically reflect in the supplier's GSTR-2A, enhancing transparency.
Compliance Requirements
3. Filing Obligations for Deductors
- Return Filing: Buyers responsible for deducting TDS must file Form GSTR-7 by the 10th of the following month.
- TDS Certificate: Deductors must provide suppliers with a TDS certificate in Form GSTR-7A, akin to Form 16A in Income Tax.
4. Supplier Benefits
- TDS Credit Utilization: Suppliers can claim the credited TDS reflected in their electronic cash ledger. This credit can either offset tax liabilities or be claimed as a refund.
5. Registration Requirements
- Buyers required to deduct TDS must register separately under GST via Form REG-07.
- Documentation includes the DDO/Tax Deductor's PAN, Aadhaar, and proof of business premises.
- As per the October 22, 2024 advisory, taxpayers should select "Others" under the "Constitution of Business" category and specify "Metal Scrap Dealers."
Special Considerations
6. Inter-Branch Transactions
- TDS also applies to inter-branch sales and purchases involving metal scrap.
7. Exemptions
- Imports: Metal scrap imports are exempt from TDS.
- Unregistered Suppliers: Purchases from unregistered suppliers are not subject to TDS but are liable for reverse charge mechanism (RCM) at 18%.
8. Applicable Products
- The TDS provisions cover metal scraps classified under Chapters 72 to 81 of the Customs Tariff Act. These include materials such as iron, steel, copper, nickel, aluminum, lead, zinc, tin, and other base metals.
Conclusion
The introduction of TDS for metal scrap under GST streamlines tax compliance, fosters accountability, and enhances revenue tracking in the scrap industry. Businesses engaged in purchasing metal scrap should ensure adherence to these provisions to avoid penalties and maximize the benefits of seamless tax credits.
