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Short answer: the 54th GST Council meeting recommended a 2% TDS on business-to-business supplies of metal scrap by a registered person, but that recommendation is not, by itself, proof of an operative rule. The official material reviewed does not establish the scrap-specific threshold, effective date, taxable base or exceptions. Treat 2% as a policy recommendation until you verify the applicable central and state or Union territory notification. If section 51 TDS is deducted and properly claimed, the registered seller receives the amount in the electronic cash ledger, not the electronic credit ledger. A qualifying cash-ledger balance can be refundable through the relevant return or, for other refund categories, through FORM GST RFD-01, subject to the current procedure.
What “GST TDS on scrap” means
GST TDS is a deduction made under section 51 of the Central Goods and Services Tax Act by a notified deductor from a payment to a supplier. It is different from income-tax TDS and different from reverse charge. The scrap question arises because the Goods and Services Tax Council recorded a proposal aimed at metal-scrap transactions between registered businesses.
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In its press release on the 54th meeting, dated 9 September 2024, the Council stated: "A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply." The CBIC publication is a record of the Council’s recommendation. It does not, in the material available for this article, provide the operative notification number or settle every condition needed to calculate a deduction. You can read the release at CBIC’s 54th GST Council press release.
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That distinction matters to a seller issuing an invoice today. A recommendation may be followed by a notification, an amendment or a different effective date. Until the notification that legally governs the transaction is checked, do not treat a headline saying “2% TDS on scrap” as a complete answer.
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What is actually known about the scrap TDS threshold?
The most important answer is also the one most often omitted: the reviewed official results do not establish a numeric threshold for metal-scrap TDS. They record the proposed rate and broad transaction description, but not a confirmed minimum invoice value, annual aggregate, payment threshold or exemption list.
| Question | What the official material establishes | What must still be verified |
|---|---|---|
| Proposed rate | 2% was recommended for the described B2B metal-scrap supply. | Whether that rate is operative for your transaction and how it is computed. |
| Minimum threshold | No scrap-specific numeric threshold is stated in the returned material. | The notification’s rupee threshold, aggregation rule and any exclusions. |
| Effective date | The Council recommendation is dated 9 September 2024. | The date on which an operative notification takes effect, including later amendments. |
| Taxable base | Not specified in the recommendation record reviewed. | Whether the deduction is calculated on the taxable value, invoice value or another prescribed base, and how tax components are treated. |
| Transaction scope | The wording refers to supply of metal scrap by a registered person in B2B supply. | Definitions, notified deductors, exceptions and treatment of particular documents or recipients. |
For a firm answer, obtain the current central notification and the corresponding state or Union territory notification where relevant. Check the notification date, commencement clause, definitions, threshold wording, rate base, exceptions and any subsequent circulars or amendments. The CBIC sectoral FAQs can help with general GST terminology, but they should not be used as a substitute for the operative scrap-specific notification.
Which parties and transactions need to be separated?
Registered seller to registered business buyer
This is the transaction described by the Council’s proposed TDS wording. If the seller, buyer and goods meet the final notification’s conditions, the buyer or another notified deductor may have to deduct and report TDS. Do not infer that every registered buyer is automatically a deductor: section 51 applies to notified classes of persons and the final instrument controls.
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The same press release separately records a recommendation for reverse charge on metal scrap supplied by an unregistered person to a registered person. Reverse charge changes who accounts for GST on the supply; it is not the same as deducting TDS from the seller’s payment. The recommendation record does not settle the operative reverse-charge notification, its effective date or how it interacts with registration thresholds.
Supplies outside the described B2B case
A sale to an unregistered customer, a transaction involving goods that are not legally classified as metal scrap, or a transaction outside the notified deductor class cannot be brought within the recommendation merely because the invoice uses the word “scrap.” Confirm the recipient’s status, the supplier’s registration, the goods classification and the notification’s scope.
TDS and reverse charge are not interchangeable
| Issue | GST TDS | Reverse charge |
|---|---|---|
| Basic function | Deducts an amount from a payment and reports it under section 51. | Shifts responsibility for paying GST on a notified supply to the recipient. |
| Effect on the seller | The deducted amount is credited to the registered deductee’s electronic cash ledger after the prescribed claim process. | The seller may receive payment without the recipient’s reverse-charge tax being treated as the seller’s TDS credit. |
| Metal-scrap proposal in the 54th Council release | 2% recommendation for registered-person B2B supply. | Separate recommendation for metal scrap supplied by an unregistered person to a registered person. |
| What proves current liability | The operative TDS notification and applicable rules. | The operative reverse-charge notification and applicable rules. |
Keeping these concepts separate prevents a common reconciliation error: recording a reverse-charge tax payment as if it were money withheld from the seller, or expecting a TDS amount to appear as input tax credit.
Where a registered seller’s TDS credit goes
CBIC’s payment rules provide that an amount deducted under section 51 and claimed by the registered person from whom it was deducted is credited to that person’s electronic cash ledger. It is not an input-tax-credit entry in the electronic credit ledger. The payment rules are available on the CBIC GST Payment Rules page.
- Identify the deduction. Match the buyer’s deduction to the seller’s GSTIN, invoice or payment reference and the period in which the deductor reported it.
- Check the deductor’s statement. A notified deductor reports TDS through the prescribed return process. Where GSTR-7 is the applicable route, compare the reported amount with the buyer’s remittance records.
- Claim or accept the amount through the prescribed process. The payment rules refer to credit after the registered person from whom tax was deducted claims it. Follow the current portal workflow and resolve any record that does not match the seller’s books.
- Confirm the ledger. Once processed, look for the amount in the electronic cash ledger. Its appearance there does not convert it into input tax credit.
- Reconcile before filing a refund or using the balance. Keep the deduction statement, invoices, payment evidence and ledger entry together. A mismatch in GSTIN, period or amount can delay correction or a refund application.
The available material does not provide a scrap-specific portal walkthrough or promise an automatic credit. A missing entry should therefore be treated as a reporting or claim problem to investigate with the deductor and the current GST portal procedure, not as proof that the amount has been lost.
Can GST TDS on scrap be refunded?
Potentially, but a refund is not automatic merely because cash is visible in the ledger. The refund rules state that a claim relating to a balance in the electronic cash ledger under section 49(6) may be made through the return for the relevant period, with GSTR-7 listed among the possible return routes. For other refund categories, the general electronic application is FORM GST RFD-01, subject to the category’s conditions and supporting documents. See the CBIC GST Refund Rules.
Use the route that matches the claim
- Electronic cash-ledger balance: determine whether the relevant return route, including GSTR-7 where applicable, is available for the claim and period.
- Other refund categories: use RFD-01 when the applicable rule requires an electronic refund application, and provide the documents and declarations required for that category.
- Excess TDS/TCS credit: distinguish an excess balance held by a deductor from TDS or TCS already paid and credited to the deductee. CBIC’s Circular No. 125/44/2019-GST explains that a deductee may adjust an excess credited amount against output liability or seek a refund under the excess electronic cash-ledger category. Because that circular is from 2019, check the current rules and the facts of the case before relying on its procedure.
Practical refund sequence
- Reconcile the cash-ledger balance with TDS statements and the relevant return period.
- Separate genuine TDS credit from cash paid for other liabilities, because the legal basis and documentation may differ.
- Choose the return-based route or RFD-01 according to the current refund rule for the claim category.
- Attach the records required by that category and retain the acknowledgement, calculation and correspondence.
- Monitor the application for deficiencies or requests for clarification; a balance is not an assurance that the claim will be sanctioned in full.
The refund rules do not turn every electronic cash-ledger balance into an unconditional payout. Eligibility, timing, documentation and the amount actually attributable to the claim must all be checked under the rules in force when you file.
Do not assume every kind of scrap has the same GST rate
“Scrap” is a commercial description, not one universal GST classification. The CBIC rate table displays ferrous waste and scrap under HSN heading 7204 at 9% CGST plus 9% SGST or UTGST, a combined 18% for that displayed entry. That figure applies to the entry shown in the table, not automatically to non-ferrous scrap, mixed material, residues, waste with a different heading or every product described as scrap. Check the goods’ technical composition and the current classification before applying a rate. The relevant table is CBIC’s GST Goods and Services Rates page.
| Classification question | Why it matters |
|---|---|
| Is the material ferrous waste or scrap under heading 7204? | The displayed 18% combined entry may be relevant, subject to the current tariff and facts. |
| Is it non-ferrous, alloy, residue, machinery or a component? | A different HSN heading or rate may apply. |
| Does the TDS notification define “metal scrap” separately? | The TDS scope may not follow a seller’s informal use of the word scrap. |
| Are CGST and SGST/UTGST or IGST applicable? | The place of supply and transaction structure affect the tax components shown on the document. |
Illustrative calculation: why the notification still matters
Assume, only for illustration, that a final notification makes a 2% deduction applicable to a taxable value of ₹100,000 and that no threshold or base adjustment changes the calculation. The arithmetic would be ₹100,000 × 2% = ₹2,000 deducted, with ₹98,000 paid before considering other invoice amounts. The ₹2,000 would be the seller’s potential section 51 cash-ledger credit after the required reporting and claim process.
This example is not evidence that ₹100,000 is above a legal threshold, that the taxable value is always the base, or that the buyer is always the deductor. Those three points depend on the operative notification. Use the example to understand the ledger movement, not to decide whether to deduct on a live invoice.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to correct them
Treating the Council recommendation as the law
Problem: a business applies 2% immediately without checking commencement, threshold or scope.
Correction: obtain the operative notification and any amendment, then document the version used for the invoice period.
Inventing a threshold from a secondary article
Problem: a rupee limit is copied without an official notification or without checking whether it is per invoice, per contract or cumulative.
Correction: record “not established” until the notification supplies the exact wording.
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Posting TDS to the electronic credit ledger
Problem: the seller treats TDS as input tax credit and uses the wrong reconciliation report.
Correction: trace the amount to the electronic cash ledger under the payment rules.
Confusing TDS with reverse charge
Problem: a recipient’s reverse-charge liability is shown as money withheld from the supplier.
Correction: identify whether the transaction is a proposed unregistered-to-registered reverse-charge case or a section 51 deduction case; they require separate legal and accounting treatment.
Assuming a cash balance guarantees a refund
Problem: a refund is filed without matching the balance to the relevant period or category.
Correction: use the applicable return or RFD-01 route, retain evidence and satisfy the category-specific conditions.
Using the 18% ferrous rate for all scrap
Problem: a commercial label replaces HSN analysis.
Correction: classify the actual material and verify the current rate entry before invoicing.
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- Confirm whether both parties are registered and whether the transaction is genuinely B2B.
- Identify the notified deductor, rather than assuming the buyer always has a section 51 duty.
- Classify the material by HSN and retain the technical description supporting that classification.
- Check the operative TDS notification for rate, threshold, effective date, base and exceptions.
- Check separately for any operative reverse-charge notification when an unregistered person supplies a registered person.
- Reconcile the deductor’s statement with the seller’s GSTIN, period, invoices and electronic cash ledger.
- Do not describe the amount as input tax credit; label it as section 51 TDS cash-ledger credit.
- Before seeking a refund, identify the legal category and select the relevant return or RFD-01 procedure.
- For an excess balance, compare current rules with the guidance in CBIC Circular No. 125/44/2019-GST; do not rely on the 2019 document alone.
Official sources to check before taking a position
Use the Council release to understand the policy recommendation, then move to the operative notifications and current portal records for the transaction date. The payment and refund rules explain the ledger and filing framework, while the rate table addresses classification-specific GST rates:
- 54th GST Council meeting press release, 9 September 2024
- CBIC GST Payment Rules
- CBIC GST Refund Rules
- CBIC Sectoral FAQs
- CBIC GST Goods and Services Rates
- CBIC Circular No. 125/44/2019-GST
The defensible answer to “What is the GST TDS limit for scrap?” is therefore conditional: a 2% rate was recommended for the specified registered-to-registered metal-scrap supply, but the threshold and other operative details must come from the notification that governs the transaction. Once validly deducted and claimed, the seller’s credit belongs in the electronic cash ledger, and any refund must follow the current cash-ledger or RFD-01 procedure that matches the claim.
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