TDS on Metal Scrap under GST: A Complete Guide

The Indian government has brought into effect new TDS provisions under the framework of Goods and Services Tax-specifically targeting all transactions in the form of metal scrap. With effect from 10 October 2024, these rules are aimed at improving tax compliance and transparency in the scrap materials sector. Let us dive into this and see what it will mean for the businesses buying and selling metal scrap.

What is TDS in GST for Metal Scrap?

TDS is a mechanism where tax is deducted at source at the time of making payment to the seller. Based on the latest GST rules, businesses, whose subject of business is procurement of metal scrap, are dutifully liable to deduct TDS at the time of entering into qualifying transactions.

And the transactions which attract TDS are under Chapter 72 to Chapter 81 of the Customs Tariff Act 1975, which comprises of:

Important Provisions of the TDS Rule

TDS shall apply on metal scrap under GST if the aggregate value of supplies exceeds ₹2,50,000 per transaction. The taxable value of scrap material will be deducted for deduction, and not the total invoice value.

Rate of deduction is provided as 2%, split as below:

Who must deduct TDS?

The Ministry of Finance issued Notification No. 25/2024-Central Tax on October 9, 2024, amending the earlier Notification No. 50/2018-Central Tax to clarify the Tax Deduction at Source (TDS) provisions under Section 51 of the CGST Act, 2017. Section 51 of the CGST Act 2017 deals with the mechanism of Tax Deduction at Source (TDS).

TDS provisions under Section 51 of the CGST Act shall not apply to the supply of goods or services between certain categories of persons specified in clauses (a), (b), (c), and (d) of sub-section (1) of Section 51 except for those specified in clause (d).

Process for becoming compliant

If you are a buyer dealing with metals scrap, here is what you need to do to become compliant with the new GST rules:

Obtain a Separate GST Registration

The buying party would be required to apply for a separate GST registration under REG-07 in order to start deducting TDS. Subsequently, the buyer can claim TDS on eligible transactions with which they will have to file a return month under Form GSTR-7. Simultaneously, the system generates a certificate of TDS, just like Form 16A under the Income Tax Act, after filing GSTR-7.

File Monthly Returns

The buyers who deduct TDS are liable to file GSTR-7 for the month. The return should be filed by the 10th of the next month where a payment liability will arise along with the return filing. This return should state the amount of TDS deducted.

Provide TDS Certificates

Once the return is filed by the purchaser, he shall issue the TDS certificate, GSTR-7A, to the supplier. Therefore, he would get the TDS credit to his ledger of cash at the end of every month.

TDS not Applicable in Respect of Metal Scrap

It is another important aspect that TDS under GST is not levied upon importing the metallic scraps. It does not draw any TDS deduction under such rules if the buyer imports scraps from abroad.

Conclusion

The introduction of TDS on metal scrap under the GST is perhaps a landmark to ensure better tax compliance in the industry. With the above move, the government has consequently mandated 2% TDS on all transactions, with an element of transparency and accountability that can be availed by the suppliers in due time.

Ensure your business is GST compliant with these new provisions by registering for GST TDS and the timely returns filing, contact Book My Accountant today for help with GST registration, TDS filing, and much more in accounting.

Understanding the New Advisory on RCM Liability and ITC Statements: What Businesses Need to Know

India's GST regime has evolved, with new responsibilities in RCM and ITC tax returns per the latest GST Council advisory. This update is important especially for businesses that require to adhere to the changing GST laws.

What Is the Reverse Charge Mechanism (RCM)?

In reverse charge, the tax burden shifts from supplier to recipient. This is used when the supplier isn't GST registered or for goods/services under reverse charge.

Businesses must analyze transactions to determine RCM coverage per the new advisory. Non compliance attracts penalties and interest charges.

Filing RCM Liability in GSTR 3B

One of the significant components of the advisory is the proper disclosure of RCM liabilities in GSTR 3B return. The GSTR 3B is a return that has to be filed on a monthly basis by the businesses and in this the details of the tax liabilities and the ITC claimed in GSTR 3B.

Therefore, to remain compliant, all parties must accurately report the RCM liabilities in the GSTR 3B returns. This involves confirmation of the invoices and deciding whether the reverse charge applies. This is because, in the process of auditing, inaccurate or omitted entries can cause a lot of problems.

ITC Statement and ITC claimed in GSTR 3B ITC Statement and ITC claimed in GSTR 3B

Starting from August 2024, the authorities have introduced a new “RCM Liability/ITC Statement” to improve accuracy in reporting Reverse Charge Mechanism (RCM) transactions.

This statement will capture RCM liabilities from Table 3.1(d) of GSTR-3B and the related ITC from Tables 4A(2) and 4A(3) of GSTR-3B. Monthly filers must start using it from August 2024, while quarterly filers will begin from the July-September 2024 period.

Any discrepancies between RCM liabilities and claimed ITC should be corrected in this statement, reconciling opening balances up to July 2024 for monthly filers and Q1 FY 2024-25 for quarterly filers. The deadline for declaring and amending the opening balance is October 31, 2024, with three amendments accepted until November 30, 2024.

Why This Advisory Matters

This advisory is therefore a timely reminder for businesses to remain cautious in their approach to GST compliance. New RCM liabilities and the emphasis on accurate ITC tax statements indicate that the authorities want to increase accountability.

Businesses should check their current GST compliance, especially regarding the Reverse Charge Mechanism and the ITC declared in GSTR 3B. Consider regular GST audits or consulting experts to identify potential issues that could lead to complications.

How Book My Accountant Can Help

At Book My Accountant (BMA), we offer GST services where we help you with GSTR 3B filing, reverse charge mechanism, and ITC tax. Our team of professionals keeps abreast with all the current advisories so that your business does not fall foul of any of the GST regulations.

To know more about GSTR 3B filings, you may refer to our comprehensive article on the same here. To get updated with the latest GST updates, please visit the GST Council’s official website here.

Book My Accountant is your one-stop solution for all your GST requirements. Get in touch with us for professional help and make sure your business is always up to date.

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