TDS on Metal Scrap- Clarification on Notification No. 25/2024-Central Tax

[Tushar Malik]

Clarification on Notification No. 25/2024-Central Tax – Applicability of TDS on Metal Scrap Transactions

Summary:

The Ministry of Finance issued Notification No. 25/2024-Central Tax on October 9, 2024, amending Notification No. 50/2018-Central Tax to clarify the applicability of Tax Deduction at Source (TDS) under Section 51 of the CGST Act, 2017. This amendment expands the scope of TDS by including registered persons purchasing metal scrap (classified under Chapters 72 to 81 of the Customs Tariff Act, 1975).

As per the new rule, TDS at 2% must be deducted if the taxable value of the transaction exceeds ₹2,50,000. Buyers must obtain a separate GST registration (Form REG-07) to deduct TDS, and the supplier will receive TDS credit in their cash ledger monthly. The amendment is effective from October 10, 2024. Businesses in this sector must ensure timely TDS deduction, filing of GSTR-7, and issuance of TDS certificates (GSTR-7A) to remain compliant.

Introduction:

On October 9, 2024, the Ministry of Finance, Department of Revenue, issued Notification No. 25/2024-Central Tax (G.S.R. 629(E)), amending Notification No. 50/2018-Central Tax dated September 13, 2018. This amendment clarifies the applicability of TDS under the GST regime for registered persons dealing in metal scrap.

Key Provisions of the Notification:

The notification has been issued under Section 51 of the CGST Act, 2017, which mandates TDS on specified transactions. The key amendments are:

1. Inclusion of Metal Scrap Transactions under TDS:
   • A new clause (d) has been added, which states: “(d) 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 other registered persons.”
   • This means buyers of metal scrap must deduct TDS at 2% when purchasing from other registered suppliers.
2. Modification of the Third Proviso:
   • The notification now states that certain transactions remain exempt from TDS, except those specified in clause (d) (i.e., metal scrap transactions).
   • This confirms that metal scrap supplies are now subject to TDS even if other transactions between specified persons are exempt.

List of HSN Codes for Metal Scrap Transactions Under TDS:

HSN Code Chapter   Description 7204 72 Ferrous waste and scrap; remelting scrap ingots of iron or steel 7404 74 Copper waste and scrap 7503 75 Nickel waste and scrap 7602 76 Aluminium waste and scrap 7802 78 Lead waste and scrap 7902 79 Zinc waste and scrap 8002 80 Tin waste and scrap 8104 81 Magnesium waste and scrap 8108 81 Titanium waste and scrap 8112 81 Beryllium, chromium, germanium, vanadium, gallium, hafnium, indium, niobium, rhenium, and thallium waste and scrap

These chapters encompass a wide range of metal scraps, including iron, steel, copper, aluminum, lead, zinc, tin, and other base metals. Businesses involved in the trade of these materials must comply with the new TDS provisions to avoid penalties.

Effective Date:

The changes introduced by this notification are applicable from October 10, 2024.

Impact of the Notification:

1. Expanded TDS Scope:
   • TDS is now applicable to metal scrap purchases exceeding ₹2,50,000.
2. New Compliance Requirements for Dealers:
   • Registered metal scrap buyers must now deduct and deposit TDS.
   • This adds an extra compliance step for businesses in this sector.
3. No Exemption for Metal Scrap Transactions:
   • Even if other supplies between specified persons are exempt from TDS, metal scrap is explicitly included under these provisions.
4. Administrative Requirements:
   • Buyers must deduct and deposit TDS correctly.
   • Timely TDS return filing (GSTR-7) and certificate generation (GSTR-7A) are required.

Key Highlights of the Notification:

• TDS Applicability: From October 10, 2024, buyers must deduct 2% TDS on metal scrap purchases exceeding ₹2,50,000.
• TDS Rate Structure:
  • CGST: 1%
  • SGST: 1% (for intra-state transactions)
  • IGST: 2% (for inter-state transactions)
• Value on which tax is to be deducted:
  • TDS should be deducted on the total value excluding GST.

When TDS is to be Deducted:

• TDS under Section 51 becomes applicable if the total value of taxable supplies made under a single contract exceeds Rs.2,50,000/-.
• If multiple contracts exist with the same supplier, TDS applies only when each individual contract exceeds Rs.2,50,000/-.
• Even if supplies are invoiced separately, TDS applies once the total contract value exceeds Rs.2,50,000/-.

Compliance Requirements:

1. Separate GST Registration for TDS Deduction:
   • Buyers must obtain Form REG-07 for TDS registration.
2. TDS Credit for Suppliers:
   • The deducted TDS will be credited to the supplier’s cash ledger on a monthly basis.
3. Monthly TDS Filing (GSTR-7 & GSTR-7A):
   • Buyers must file GSTR-7 every month (before the 10th of the next month).
   • Once GSTR-7 is filed, GSTR-7A (TDS certificate) is generated as proof of deduction and deposit.