New Notification Shifts GST Liability to Buyers, Aims to Enhance Compliance in the Metal Scrap Industry Starting October 10, 2024

The Department of Revenue, Ministry of Finance, through a recent Notification mandates the introduction of the Reverse Charge Mechanism (RCM) on the supply of metal scrap by unregistered dealers to registered dealers. The move was anticipated subsequent to the proposals following the 54th GST Council meeting held on 9 September 2024 in New Delhi. Under the newly promulgated regulation, buyers of metal scrap will be responsible for paying the Goods and Services Tax (GST) instead of the suppliers, marking a shift from the usual forward charge mechanism. The change brings forward a significant shift within the scrap metal industry, not requiring scrap dealers who typically supply metal scrap to collect and deposit GST on their sales, instead shift the responsibility onto manufacturers or entities involved in the processing of scrap metal to pay the applicable GST on the transactions. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here The move intends to enhance tax compliance in an industry traditionally dominated by unorganized players, and to reduce tax evasion while placing accountability on registered recipients to ensure no shortfall in taxes to be collected. Following the 54th GST Council Meeting, the following transcript was issued as part of the Press Release: “Reverse Charge Mechanism (RCM) to be introduced on supply of metal scrap by unregistered person to registered person provided that the supplier shall take registration as and when it crosses threshold limit and the recipient who is liable to pay under RCM shall pay tax even if supplier is under threshold. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.” It is to be noted that the only change introduced by means of the  54th GST Council Meeting is the mechanism of payment of GST; the sale of scrap metal is still taxed at 18% GST, but with the levy being shifted towards the registered buyer to pay the same towards the Government, which can be later claimed in the form of Input Tax Credit (ITC). In Conclusion, the move set to be effective from October 10, 2024 is a means to effectuate stringent and watertight GST laws to ensure tax compliance among players in the largely unorganized scrap metal industry.