Categories: GST Return

TDS compliance process for metal scrap dealers under GST:

TDS compliance process for metal scrap dealers under GST

New GST updates for the Iron & Steel Industry regarding the sale of metal scraps, based on Notification No. 06/2024-Central Tax (Rate) and Notification No. 25/2024-Central Tax: The recent amendment to Notification No. 4/2017-Central Tax (Rate), u/s 9(3) of the CGST Act, 2017, addresses metal scrap transactions. This update, based on recommendations by the GST Council, introduces important changes that impact tax liabilities, particularly under the Reverse Charge Mechanism.

Objective & Impact of GST compliance on sale of metal scraps:

  • These provisions aim to streamline tax compliance for metal scrap transactions and ensure proper TDS and GST reporting within the industry. This change aims to improve tax collection on metal scrap sales by ensuring that GST liabilities are met even when dealing with unregistered sellers.
  • It also helps reduce tax evasion in the metal scrap sector and provides clarity on tax obligations for both registered buyers and sellers.
  • Ensuring accurate and timely filing of GSTR-7 is crucial, as it directly impacts the deductee’s ability to claim TDS credit in their GST returns.

Key Provisions Effective from October 10, 2024

  1. Reverse Charge Mechanism (RCM) on Metal Scrap:

    • If the Seller is Unregistered: The Registered Buyer must pay GST under RCM. RCM to be introduced on supply of metal scrap by unregistered person to registered person . Provided that the supplier shall take registration as & when it crosses the threshold limit. Such GST Registered Recipient will raise a Self Invoice  under section 31(3)(f) of the Central Goods and Services Tax Act, 2017. Credit of GST  paid under RCM by Such Registered Recipient is available (Section 16(2) of the CGST Act read with Rule 36(1)(b) of the CGST Rules).
    • If the Seller is Registered: The Seller is responsible for paying GST (no RCM applies).
  2. TDS Applicability on Metal Scrap Sales:

    • Rate: TDS at 2% is required on the value of goods supplied. TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.
    • Threshold: TDS is applicable only if the value of goods exceeds ₹2.5 lakhs (excluding GST).
    • Calculation: Deduct TDS on the value of goods alone, excluding any GST components (CGST/SGST/IGST/UTGST).
    • In case a GST Registered recipient deducts 2 percentage Tax Deducted at Source while making a payment to a supplier, who is later found to be non-existent or credit is doubtful because of the preceding GST supplier(s), how will the recipient ensure GST compliance and avail ITC credit?
  3. TDS Compliance Requirements:

    • TDS Return: File the TDS return in Form GSTR-7 on or before the 10th of the following month. File a monthly TDS return in Form GSTR-7. Include details like the GSTIN of the deductee, invoice value, TDS amount, and any other necessary information.
    • TDS Certificate: Issue a TDS certificate (Form GSTR-7A) to the supplier, confirming the deduction. Issue TDS certificates to suppliers using Form GSTR-7A. This certificate provides proof of TDS deduction and is essential for the deductee to claim credit.
    • Claiming TDS: The supplier (deductee) can claim the TDS amount based on the details provided by the deductor in GSTR-7.  The TDS deducted will be credited to the deductee’s GSTR-2A form. Once the TDS return is filed, the credit will reflect in their electronic cash ledger, allowing them to utilize the TDS amount towards their GST liabilities.
  4. GST Registration and Compliance:
    • The GST portal will soon allow scrap dealers (registered persons) to register for TDS compliance through FORM GST REG-07. This update is awaited for full compliance functionality.
    • As of October 13, 2024, the government released Notification 25/2024-Central Tax to facilitate compliance for businesses dealing with metal scrap under Section 51 of the CGST Act, 2017.
    • Registration Update: Register separately for TDS purposes using Form REG-07. In the “Constitution of Business” section, select “Others” and specify “Metal Scrap Dealers” in the provided text box.

GST Advisory for Reporting TDS Deducted by scrap Dealers in Oct 2024

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

Recent Posts

Unveiling Secrets Behind Ten Characters of PAN Card

  Decode Your Permanent Account Number (PAN) Card This is a great breakdown of the PAN structure! You’ve explained it… Read More

14 hours ago

GST on sale of all used cars, including electric vehicles

GST on sale of all used cars, including electric vehicles The 55th GST Council meeting held on December 21, 2024,… Read More

2 days ago

Key Budget amendment in carry forward of losses 72A & 72AA

Budget 2025: Amendment in carry forward of losses 72A & 72AA This amendment is a significant move by the government… Read More

2 days ago

Post Budget 2025: Sec 87A Applicability on old & New regime

Post Budget 2025: Applicability of Sec 87A on old & New regimes In this blog explain the impact of Budget… Read More

2 days ago

Statutory Compliance Calendar for January & Feb 2025

Statutory Compliance Calendar (Due Dates) for the month of January 2025. In January 2025, businesses in India must adhere to… Read More

3 days ago

Cabinet approved New Income Tax Bill to replace Old tax Law

Cabinet approved New Income Tax Bill to replace Old tax Law The Union Cabinet has approved a new Income Tax… Read More

3 days ago
Call Us Enquire Now