Registered businesses that buy scrap, e-waste or used cooking oil from other registered businesses will have a new tax deduction duty related to GST TDS on scrap from 1 November 2026. Notification No. 07/2026-Central Tax dated 27 October 2026 extends GST tax deduction at source (TDS) under Section 51 of the CGST Act from metal scrap alone to five categories of goods.
If you are a recycler, processor, manufacturer or trader who buys any of these goods, this notification decides whether you must deduct tax from your payments. This guide from Sagar S Gupta & Co, Chartered Accountants in Shivpur, Varanasi, explains what the notification says, how the TDS works and what to do before the effective date.
Quick summary
| Point | Details |
|---|---|
| Notification | No. 07/2026-Central Tax dated 27 October 2026 |
| Issued under | Sub-section (3) of Section 1 read with Section 51 of the CGST Act, 2017, on the GST Council’s recommendation |
| Amends | Notification No. 50/2018-Central Tax dated 13 September 2018 (G.S.R. 868(E)) |
| Change | Clause (d) substituted to cover five categories of goods |
| Effective date | 1 November 2026 |
| Who deducts | A registered person receiving the specified goods from another registered person |
Background: Section 51 and Notification 50/2018-Central Tax
Section 51 of the CGST Act allows the Government to require certain persons (“deductors”) to deduct tax from payments to suppliers. Notification No. 50/2018-Central Tax lists the categories of deductors beyond government departments. Until now, clause (d) covered registered persons receiving metal scrap from registered suppliers, which was added by Notification No. 25/2024-Central Tax from 10 October 2024.
The 57th GST Council meeting recommended extending this approach to waste and scrap of plastics, electrical and electronics waste and scrap, waste and scrap of tyres and used cooking oil, at a TDS rate of 2%. Notification 07/2026-Central Tax implements that recommendation.
What the notification does
Clause (d) of Notification 50/2018-Central Tax is substituted. From 1 November 2026, it covers any registered person receiving supply of any of the following goods from another registered person:
| Sl. | Goods | Classification |
|---|---|---|
| (i) | Used cooking oil | Heading 1518 of the Customs Tariff |
| (ii) | Waste and scrap of plastics | Heading 3915 |
| (iii) | Waste and scrap of tyres | Heading 4004 |
| (iv) | Metal scrap | Chapters 72 to 81 |
| (v) | Electrical and electronics waste and scrap | Heading 8549 |
Metal scrap was already covered. The newly added goods are used cooking oil, plastic scrap, tyre scrap and e-waste and scrap.
How the TDS works
The operational rules come from Section 51 and the related CGST Rules. In summary:
- Rate: 2% of the taxable value, made up of 1% central tax and 1% State or Union Territory tax, or 2% integrated tax.
- Threshold: TDS applies where the total value of supply under a contract exceeds ₹2.5 lakh, excluding GST.
- Deduction point: at the time of payment or credit to the supplier, whichever is earlier.
- TDS on the taxable value: the deduction is on the value excluding GST, not on the GST amount.
- Deposit and return: the deductor deposits the tax and files the monthly return in FORM GSTR-7 by the 10th of the following month.
- Certificate: the supplier is given a TDS certificate through FORM GSTR-7A.
- Registration: the buyer must hold a TDS registration under FORM GST REG-07 to act as a deductor. A buyer already registered as a deductor for metal scrap does not need a fresh one.
- Credit to the supplier: the supplier receives the amount in its electronic cash ledger and can use it to pay GST liability.
- Place of supply condition: Section 51 has a condition relating to the location of the supplier and the place of supply, so inter-State purchases should be checked against it.
Worked example
A registered recycler buys plastic scrap worth ₹5,00,000 from a registered supplier under one contract. GST is charged at 18%.
| Particulars | Amount (₹) |
|---|---|
| Value of plastic scrap | 5,00,000 |
| GST at 18% | 90,000 |
| Invoice value | 5,90,000 |
| TDS at 2% on ₹5,00,000 | 10,000 |
| Net amount paid to supplier | 5,80,000 |
The buyer deposits ₹10,000 through GSTR-7 by the 10th of the next month and issues the certificate in GSTR-7A. The supplier sees ₹10,000 in its cash ledger.
How the three scrap notifications fit together
This notification is one part of a package that begins on 1 November 2026:
| Transaction | Position from 1 November 2026 |
|---|---|
| Registered supplier to registered recipient, contract value above ₹2.5 lakh | Recipient deducts TDS at 2%; supplier charges GST on forward charge |
| Registered supplier to registered recipient, contract value up to ₹2.5 lakh | No TDS; forward charge by the supplier |
| Unregistered supplier to registered recipient | No TDS; recipient pays GST under reverse charge, as notified for the specified goods (Notification 04/2026-Central Tax (Rate)) |
| Supply to an unregistered recipient | No TDS; supplier charges GST on forward charge if registered |
Notification 06/2026-Central Tax also withdraws the registration exemption for suppliers of these goods, so a supplier who crosses the threshold must register, after which their business supplies fall under the TDS rule. Please check the full text of each notification for the exact conditions.
Who is affected
- Recyclers and processors: plastic granule makers, tyre pyrolysis and crumb rubber units, e-waste processors, biodiesel manufacturers and metal recyclers
- Manufacturers who buy scrap as raw material, such as steel and metal producers
- Scrap traders and aggregators who are registered and buy from other registered persons
- Registered suppliers of these goods, who will see TDS reflected in their cash ledger and must reconcile it
- Accounts, purchase and finance teams who control payments and vendor onboarding
Practical steps before 1 November 2026
- List the goods you buy. Check whether any purchases fall under headings 1518, 3915, 4004, 8549 or Chapters 72 to 81.
- Identify vendor status. Record whether each vendor is registered, as this decides between TDS and reverse charge.
- Get TDS registration. If you have no deductor registration, apply in FORM GST REG-07 before you start deducting.
- Track contract value. Monitor the ₹2.5 lakh threshold on a contract basis, excluding GST.
- Update accounting and payment systems. Build the 2% deduction on taxable value into your payment process and ledgers.
- Set a monthly calendar. Deposit and file GSTR-7 by the 10th of the next month, and issue GSTR-7A certificates promptly.
- Inform your suppliers. Tell registered vendors about the deduction and the certificate they will receive, and ask them to reconcile their cash ledger.
- Keep records of contracts, invoices, payment dates and challans for audit and assessment.
Common mistakes to avoid
- Deducting on the GST-inclusive amount. TDS is on the taxable value.
- Ignoring the contract-level threshold. Splitting orders does not remove the obligation where it is one contract.
- Treating unregistered vendors like registered ones. For unregistered suppliers, reverse charge applies instead of TDS.
- Missing the 10th of the month. Late filing of GSTR-7 can lead to late fees and interest.
- Delaying the certificate. The supplier needs GSTR-7A to reconcile.
- Assuming only large recyclers are affected. Any registered buyer of these goods from a registered supplier can be a deductor.
Frequently Asked Questions (FAQs)
1. What is Notification No. 07/2026-Central Tax?
It substitutes clause (d) of Notification 50/2018-Central Tax so that registered persons receiving used cooking oil, plastic scrap, tyre scrap, metal scrap or e-waste from registered suppliers must deduct GST TDS from 1 November 2026.
2. Which goods are covered?
Used cooking oil (heading 1518), waste and scrap of plastics (3915), waste and scrap of tyres (4004), metal scrap (Chapters 72 to 81) and electrical and electronics waste and scrap (8549).
3. What is the TDS rate?
2% of the taxable value: 1% central tax plus 1% State or UT tax, or 2% integrated tax.
4. Is there a minimum limit?
Yes. TDS applies where the contract value exceeds ₹2.5 lakh, excluding GST.
5. Does TDS apply to purchases from unregistered suppliers?
No. For unregistered suppliers, the registered buyer pays tax under reverse charge, as notified separately for the specified goods.
6. Was metal scrap already covered?
Yes. TDS on metal scrap has applied since 10 October 2024. The new notification adds the four other categories and restates the clause.
7. Do I need a separate registration to deduct TDS?
You need TDS registration in FORM GST REG-07. If you are already registered as a deductor, for instance for metal scrap, a fresh registration is not needed.
8. When do I file the TDS return?
FORM GSTR-7 by the 10th of the following month, and the certificate is issued in FORM GSTR-7A.
9. How does the supplier benefit?
The TDS amount is credited to the supplier’s electronic cash ledger and can be used to pay GST.
10. From which date does it apply?
1 November 2026.
Also Read: https://cassgc.com/2026/10/31/gst-registration-scrap-suppliers/
On 26 October 2026, the Central Board of Indirect Taxes and Customs (CBIC) issued three Central Tax notifications. Two more followed on 27 October 2026. On 26 October 2026, CBIC also issued eight circulars (Circular Nos. 257/03/2026-GST to 264/10/2026-GST). These circulars put into effect key recommendations of the 57th GST Council Meeting. They bring uniformity, procedural clarity and relief for taxpayers in the areas of registration, adjudication, pre-deposits, the Input Service Distributor (ISD) mechanism, compliance by banks and NBFCs, input tax credit on motor vehicles, and export refunds.
Below is a consolidated executive summary, prepared by Sagar S Gupta & Co, of the main points in each circular.
Notifications
| Number | Date | Category |
| 07/2026- Central Tax | 28-Oct-2026 | Seeks to amend notification No. 50/2018- Central Tax dated 13th September, 2018 |
| 06/2026- Central Tax | 28-Oct-2026 | Seeks to amend notification No. 5/2017- Central Tax dated 19th June, 2017 |
| 05/2026-Central Tax Refund Registration | 26-Oct-2026 | Seeks to notify the Central Goods and Services Tax (Amendment) Rules 2026. |
| 04/2026-Central Tax | 26-Oct-2026 | Seeks to notify category of supplies for purpose of e-invoicing. |
| 03/2026-Central Tax | 26-Oct-2026 | Seeks to notify section 153 to section 155 of Finance Act, 2026 to come into force |
Circular
| Number | Date | Category |
| 264/10/2026-GST | 26-Oct-2026 | Clarification in respect of the omission of rule 96(10) of the Central Goods and Services Tax Rules, 2017. |
| 263/09/2026-GST | 26-Oct-2026 | Clarification in respect of receipt of payment for export of goods or services. |
| 262/08/2026-GST | 26-Oct-2026 | Clarification on Input Tax Credit admissibility to authorised agents appointed by manufacturers for sale of motor vehicles, pursuant to Circular No. 231/25/2024-GST dated 10.09.2024. |
| 261/07/2026-GST | 26-Oct-2026 | Clarification on issues related to provisions of section 17(4) of the Central Goods and Services Tax Act, 2017. |
| 260/06/2026-GST | 26-Oct-2026 | Clarification on issues pertaining to Input Service Distributor. |
| 259/05/2026-GST | 26-Oct-2026 | Clarification on various issues pertaining to the amount paid as pre-deposit as per sub-section (6) of section 107 or sub-section (8) of section 112 of the CGST Act |
| 258/04/2026-GST | 26-Oct-2026 | Clarification on issues related to demand, adjudication and appeal proceedings under the CGST Act, 2017. |
| 257/03/2026-GST | 26-Oct-2026 | Guidelines for the handling of applications for GST registration. |
How Sagar S Gupta & Co can help
Sagar S Gupta & Co is a Chartered Accountants firm in Shivpur, Varanasi, led by CA Sagar Gupta (FCA, ACS, LLB, B.Com (Hons)), registered with ICAI. Since 2017, we have supported clients across manufacturing, industries, corporates, hotels, startups, trading, textiles, healthcare and education. We can help you:
- decide whether you are a deductor for any of the five categories,
- obtain TDS registration in FORM GST REG-07,
- set up TDS deduction, GSTR-7 filing and GSTR-7A certificates,
- reconcile TDS credits in your cash ledger as a supplier,
- manage reverse charge and TDS across your scrap purchases.
Contact Sagar S Gupta & Co for a GST TDS readiness review before 1 November 2026.
Disclaimer: This article is for general information only and is not legal or professional advice. Rate, threshold and procedure follow Section 51 and the related rules. Please read the official notifications and consult a qualified professional before acting.