The 54th Goods and Services Tax Council meeting held on Sept 9, 2024, has recommended the introduction of the Reverse Charge Mechanism on metal scrap. This could have a substantial impact on businesses in the scrap industry.
Usually, the seller charges the buyer a tax. However, under the new provision of RCM, the buyer will be liable to pays the tax directly to the government.
The Council stated that if a business is selling metal scrap and is not registered for GST, it will not need to charge buyer for a tax. The buyer on the hand who is registered for GST, will then pay the tax directly to the government.
The provision also noted that an unregistered metal scrap seller, with sales exceeding a certain limit, will need to register for GST. After registration, the same RCM rules mentioned above will apply.
The GST Council has also recommended a 2% Tax Deducted at Source (TDS) on the supply of metal scrap by registered persons in the business to business supply of scrap.
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The new introduction could have a potential negative impact on metal scrap recyclers like Gravita India and Pondy Oxide & Chemicals, who buy metal scrap for their business.
It could also negatively impact steel mills like Tata Steel and JST Steel who heavily rely on metal scrap for raw material.
Smaller sellers of metal scrap, on the other hand, may benefit from not having to deal with GST registration and compliance.
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