GST TDS Registration for Scrap Dealers: New Rules

When a business purchases certain goods, it may have to deduct a small amount of tax from the payment made to the seller and deposit it with the government. This is called GST TDS. Earlier, this requirement covered specified metal scrap purchases, but the government has now added four more categories of goods. Let’s understand what GST TDS registration means and which businesses need to obtain it.

Need help with GST registration and compliance? Connect with Startup Movers for GST registration, return filing and business compliance support. We make the process simpler for your business.

What Is GST TDS Registration for Scrap Dealers?

GST TDS registration is a special registration for businesses that are required to deduct tax when they purchase certain specified goods from registered suppliers. This requirement comes under Section 51 of the Central Goods and Services Tax (CGST) Act, 2017.

In simple words, when a registered business buys goods such as metal scrap, used cooking oil or plastic waste from another registered business, it may have to deduct a small amount of tax from the seller's payment and deposit it with the government.

For example: ABC Traders, a GST-registered business, purchases metal scrap worth ₹4 lakh (excluding GST) from XYZ Metals, which is also GST-registered. If the conditions under Section 51 are met, ABC Traders must deduct GST TDS at 2%, amounting to ₹8,000, from the payment and deposit it with the government.

In this example:

• ABC Traders is the TDS deductor because it purchases the metal scrap and deducts the tax.
• XYZ Metals is the supplier because it sells the metal scrap and receives the payment after TDS deduction.

To fulfil this responsibility, ABC Traders must apply for GST TDS registration using Form GST REG-07. This is a separate registration, even if the business already has a regular GST registration.

Remember: The special TDS registration requirement applies to the notified buyer, not simply to a business because it sells scrap.

Which Goods Are Covered Under the New GST TDS Rules?

Earlier, the special TDS requirement covered metal scrap. Notification No. 07/2026-Central Tax dated 27 October 2026 has added four more categories of goods, effective from 1 November 2026.

The notified goods are:

These classifications are based on the First Schedule to the Customs Tariff Act, 1975. The TDS requirement applies to goods falling under these specified classifications, not automatically to every used or discarded product.

Why Do Businesses Need to Obtain GST TDS Registration?

Not every scrap dealer needs GST TDS registration. This registration is required for businesses that buy specified goods from registered suppliers and fall under the GST TDS provisions.

The following conditions must be met for GST TDS to be deducted:

1. Both parties must be registered: The buyer and the supplier must have valid GST registration.
2. The goods must be specified: The purchase must involve metal scrap, used cooking oil, waste and scrap of plastics, waste and scrap of tyres, or electrical and electronic waste and scrap.
3. Contract value must exceed ₹2.5 lakh: The total taxable value under the contract must be more than ₹2.5 lakh, excluding GST and cess.
4. The place-of-supply condition must be satisfied: TDS is not deducted if the supplier's location and the place of supply are in a State or Union Territory different from the State or Union Territory where the buyer is registered.

Important: The buyer is responsible for obtaining GST TDS registration and deducting tax when these conditions are met. A business does not need this special registration simply because it sells the specified goods.

What Is the GST TDS Rate and When Does It Apply?

Under Section 51 of the CGST Act, GST TDS is generally deducted at a total rate of 2% when the taxable value of supplies under a contract exceeds ₹2.5 lakh and the other conditions are satisfied.

The rate is divided as follows:

• Intra-State supply: 1% CGST + 1% SGST.
• Inter-State supply: 2% IGST, where the conditions for deduction under Section 51 are met.

The ₹2.5 lakh limit is calculated on the total taxable value under a contract, excluding GST and cess. It is not a separate limit for every invoice.

What Should Businesses Enter Under "Others" in GST REG-07?

When applying for GST TDS registration, businesses must select “Others” under “Constitution of Business” in Part B of Table 2 of Form GST REG-07. They must then enter their business category in the text box:

• Used Cooking Oil Dealers
• Waste and Scrap of Plastics Dealers
• Waste and Scrap of Tyres Dealers
• Electrical and Electronics Waste and Scrap Dealers

Existing metal scrap dealers must follow the same process and enter “Metal Scrap Dealers” in the text box.

The government has made GST registration amendments easier with automatic approval for certain changes through an OTP process. To check out the new rules Read our guide on GST Registration Amendment Rules 2026 to know more.

Conclusion

The new GST TDS rules expand the compliance requirements beyond metal scrap to four additional categories of goods from 1 November 2026. Businesses receiving these specified goods from registered suppliers should check whether they need GST TDS registration, apply through Form GST REG-07 and follow the applicable deduction and return-filing requirements.

Need help with GST registration and compliance? Connect with Startup Movers for GST registration, return filing and business compliance support. We make the process simpler for your business.