Recipients of Metal Scraps Liable for Tax under RCM Even if Supplier is Below GST Threshold, 2% TDS Apply: FM

The 54th GST ( Goods and Services Tax ) council meeting held on 9th September 2024 has recommended 2% TDS on the supply of metal scrap by registered persons in B to B supply. It has provided the clarifications on the RCM. The meeting was presided by the Finance minister Nirmala Sitharaman.

The Council has recommended the introduction of the Reverse Charge Mechanism (RCM) on metal scrap transactions, which would have a substantial impact on businesses in the scrap industry.

Under this new provision, when a metal scrap supplier is unregistered but supplies to a registered entity, the recipient (buyer) will be liable to pay tax under RCM, even if the supplier is below the GST threshold.

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Under the new recommendations made by the council, the recipient of the metal scrap—who is a registered entity—will bear the responsibility of paying the GST on the supply, as the supplier remains unregistered.

This will apply until the point where the supplier crosses the prescribed threshold limit for GST registration. Once the threshold is crossed, the supplier will be required to register under the GST framework and comply with the normal taxation procedures.

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Another key proposal is the requirement for the recipient to pay tax under RCM, even if the supplier remains below the GST threshold. This ensures that all metal scrap transactions are taxed, regardless of the supplier’s registration status, effectively broadening the tax base in this sector.

In addition to the RCM provisions, the GST Council has also proposed that a 2% Tax Deducted at Source (TDS) will apply to Business-to-Business (B2B) supplies of metal scrap.

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