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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →Do not deduct 2% from every scrap invoice yet. The 2% figure comes from the GST Council’s recommendation for metal scrap supplied by one registered person to another in a B2B transaction. The CBIC press release records that recommendation, but it does not by itself establish the notification, effective date, covered tariff classifications, or whether the calculation base includes GST. Confirm the operative notification and the relevant tax period before treating a deduction as legally required.
Once the rule applicable to your transaction is verified, calculate the deduction as 2% × the base defined by that rule, keep the goods value, taxable value and GST amount as separate invoice fields, and reconcile the deduction to the supplier, payment, accounting entry and statutory records. Do not confuse this proposed GST mechanism with income-tax TDS on purchases under section 194Q or income-tax TCS reporting for specified scrap transactions.
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What the 2% scrap TDS reference actually means
On 9 September 2024, the GST Council’s 54th-meeting press release stated: “A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.” The statement is a recommendation recorded in a CBIC-hosted press release. A press release is not a substitute for the operative notification and rules that create an enforceable deduction.
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Before posting a liability, verify all of the following against the notification and any related circular:
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- Accounting for consignment,hire purchase and instalment
- the date from which the deduction applies;
- the exact metal-scrap classifications or descriptions covered;
- whether both parties must be GST-registered and whether any buyer category is excluded;
- which transaction date controls the obligation;
- the person responsible for deducting and remitting the amount; and
- the statutory base on which the percentage is applied, including the treatment of GST shown on the invoice.
If any of those points is unresolved, place the invoice in an “ applicability pending notification check” queue rather than treating 2% as a universal scrap charge. A deduction made under the wrong regime can leave the supplier’s receivable, your payment, and your tax records permanently out of balance.
First identify which tax regime applies
“TDS on scrap” is used for three different compliance ideas. Classify the transaction before calculating anything.
| Regime | What triggers it | Rate or threshold in the cited guidance | What to verify before booking |
|---|---|---|---|
| GST TDS recommendation for metal scrap | Recommended for a supply of metal scrap by a registered person to another registered person in a B2B supply | 2% recommendation; operative rate, base, classifications and start date are not established by the press release alone | GST notification, effective date, goods classification, registration status and base, including GST treatment |
| Income-tax TDS on purchase of goods | Qualifying purchases from a resident seller exceeding the annual threshold in the applicable income-tax provision | 0.1% on the amount above ₹50 lakh in a previous year, subject to the conditions in the Income Tax Department’s guidance | Buyer and seller status, turnover and threshold computation, transaction date, PAN or other statutory requirements, and the current section reference |
| Income-tax TCS or specified-transaction reporting | Specified transactions, including sale of scrap in the Form 143 workflow | The Form 143 manual establishes a quarterly statement process; it does not establish the GST TDS calculation | Whether the transaction is reportable under the applicable income-tax TCS or statement rules and which form or payment process applies |
The Income Tax Department’s TDS on Purchase of Goods guidance describes the income-tax purchase regime. The Form 143 User Manual describes quarterly statements for specified transactions. Neither source turns the proposed GST deduction into income-tax TDS or TCS.
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How to calculate the GST deduction after the rule is confirmed
Use a transaction-specific calculation, not a blanket percentage of the invoice total. The safe formula is:
GST TDS amount = applicable rate × statutory deduction base
For the recommendation discussed here, the rate variable would be 0.02 only if the operative notification confirms 2% for the transaction. The base variable must be taken from that notification. Do not assume it is the invoice grand total, the taxable value, or the value excluding GST until the rule says so.
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Step 1: Establish that the invoice is in scope
- Confirm that the seller is registered under GST and that the buyer’s registration status satisfies the operative rule.
- Confirm that the supply is genuinely B2B and that the goods meet the notification’s metal-scrap description or classification.
- Check the supply or deduction date against the rule’s effective date. A press-release date is not automatically an implementation date.
- Record the invoice number, date, supplier GSTIN, buyer GSTIN, description, quantity and classification evidence used for the decision.
Step 2: Identify the statutory base
Read the notification’s definition of the amount subject to deduction. If it specifies taxable value, use the taxable value field. If it specifies another amount or gives a rule for GST, follow that wording exactly. If the notification is silent or your transaction falls outside its stated scope, stop the calculation and obtain a tax determination rather than importing the income-tax 194Q treatment.
Step 3: Apply the confirmed rate
Enter the confirmed base as B and the confirmed rate as R. The calculation is TDS = B × R. In a system configured for the recommendation, R would be 0.02 only after the notification check. Store the base and rate alongside the amount so a reviewer can reproduce the result.
Step 4: Calculate the payment to the supplier
Keep three amounts distinct: the invoice amount before deduction, the TDS amount, and the net amount paid. Do not alter the tax invoice’s GST rate or tax amount merely because a deduction is made. The deduction is a payment and compliance entry that must be traceable to the underlying invoice.
Step 5: Preserve an audit trail
Save the notification or internal rule reference, classification decision, calculation base, rate, approval, payment reference and related deposit or return record. A spreadsheet can be useful, but the workflow below is an internal control inferred from the invoice and accounting records that the rules require; it is not a government-prescribed spreadsheet format.
What must remain visible on the GST invoice
GST invoice rules require key information such as the description of goods, quantity, total value, taxable value, tax rate and tax amount, together with place-of-supply details where applicable. The CBIC tax-invoice rules page is the reference for those fields.
For reconciliation, do not overwrite the invoice’s taxable value with a net-of-TDS figure. Capture at least these separate columns:
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- invoice number and invoice date;
- supplier legal name and GSTIN;
- buyer’s GSTIN and place of supply where applicable;
- scrap description, quantity, unit and classification used for the scope test;
- goods value and taxable value;
- GST rate and GST amount shown on the invoice;
- statutory base selected for TDS, which may or may not equal taxable value;
- confirmed TDS rate and calculated amount;
- gross amount payable, deduction, net payment and payment date; and
- deposit, return or certificate references required by the operative law.
A practical invoice-to-payment reconciliation
Reconcile one invoice at a time, then review the ledger in aggregate. The following sequence prevents a GST amount from being accidentally used as the deduction base.
- Start with the source invoice. Enter the invoice number exactly as issued and attach the electronic or paper copy. Check that the supplier, quantity, description, taxable value and GST amount agree with the purchase record.
- Validate the parties. Compare the supplier GSTIN and your GSTIN with the registration details used for the B2B scope test. A mismatch should stop automatic deduction.
- Validate the goods. Retain the scrap description, purchase order, weighbridge record or other classification support used to decide whether the notification covers the goods. Do not infer coverage merely from the word “scrap” in a narration.
- Validate the date. Use the transaction or deduction date specified by the operative rule and record the tax period. If the date falls before the rule’s effective date, route it for review.
- Recreate the base. Show the amount selected under the notification in a dedicated field. Keep taxable value and GST amount beside it, even when they happen to be equal to or different from the base.
- Recalculate independently. Multiply the recorded base by the confirmed rate. A second person or a locked spreadsheet formula should be able to reproduce the amount without reading a payment memo.
- Match the bank payment. The gross invoice liability less the recorded deduction should equal the net payment, subject to credit notes, advances, retention or other separately documented adjustments.
- Match statutory records. Link the deduction to the related deposit, return, statement or certificate reference required by the notification. Do not mark an invoice “reconciled” merely because the supplier received a net amount.
- Clear exceptions. Investigate differences caused by credit or debit notes, multiple invoices in one payment, rounding, cancelled invoices, changes in classification or a revised tax determination. Keep the original calculation and the correction rather than overwriting history.
Is GST deducted on the GST amount too?
There is no safe yes-or-no answer until the GST TDS notification defines its base. The 2% recommendation in the press release does not state whether GST charged on the invoice is included or excluded. Therefore, do not use a general convention or a software default to decide the amount.
Read the operative rule for the exact transaction and document the conclusion in the invoice file. If the rule excludes GST, calculate on the specified pre-GST base. If it includes GST or defines a different amount, follow that wording. If the rule is unclear, obtain a written interpretation before deducting and apply the same documented treatment consistently to comparable invoices.
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CBDT Circular No. 13 of 2021 addresses income-tax TDS under section 194Q, not GST TDS on metal scrap. Where GST is separately indicated under the contract and deduction occurs at the time of credit, the circular says the GST component is excluded from the 194Q base. If payment occurs before credit, the circular says deduction is on the whole amount because the future GST component cannot yet be identified. Read the CBDT Circular No. 13 of 2021 for that income-tax rule.
That timing and GST-exclusion treatment does not establish the base for the separate GST scrap mechanism. Reusing the 194Q convention can produce an under-deduction or over-deduction even when the arithmetic is correct.
How the income-tax purchase regime differs
The Income Tax Department describes section 194Q as applying when qualifying purchases from a resident seller exceed ₹50 lakh in a previous year, with deduction at 0.1% on the amount above that threshold, subject to the provision’s conditions. This is an income-tax calculation based on qualifying purchases and an annual threshold; it is not the proposed 2% GST TDS on a B2B metal-scrap supply.
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For transactions on or after 1 April 2026, the department says taxpayers should use the applicable table item in section 393 of the Income-tax Act, 2025 rather than relying on old section numbers. Check the current wording and table item in the department’s Tax Payments FAQ and the current purchase-of-goods guidance before citing a section on a payment document. A contract can require separate analysis under both GST and income-tax laws; one deduction does not automatically satisfy the other.
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Where scrap TCS or Form 143 fits
The Form 143 manual describes quarterly statements for specified transactions that include sale of scrap. That reporting channel is distinct from both the GST TDS recommendation and the income-tax purchase TDS calculation. Determine whether your role is buyer or seller, whether the transaction is one of the specified categories, and which statement or collection obligation applies. Do not label a Form 143 entry as “GST TDS” in the ledger unless the applicable law expressly requires that terminology.
A non-numeric calculation template for your working paper
Because the operative GST scrap rule must be confirmed for the relevant tax period, use variables until the notification is identified:
| Working-paper field | Value to enter | Control question |
|---|---|---|
| Invoice taxable value | TV |
Does it agree with the issued GST invoice? |
| GST amount on invoice | GST |
Is the rate and amount supported by the invoice and place-of-supply treatment? |
| Notification-defined TDS base | B |
What clause establishes this base, and does it include GST? |
| Confirmed GST TDS rate | R |
Does the operative rule apply 2% to this transaction and period? |
| Calculated deduction | B × R |
Can an independent reviewer reproduce the result? |
| Net payment | gross invoice amount − deduction |
Does the bank payment agree after documented adjustments? |
This template deliberately does not insert a rupee example. A numeric example would imply that the statutory base and effective date are settled when the cited press release does not establish them.
Records to retain
CBIC’s Accounts and Records Rules require businesses to maintain tax and accounting records, including records relevant to stock, scrap and wastage and invoice registers. Retain the records needed to connect physical movement, invoicing, deduction and payment:
- purchase orders, contracts and amendments;
- weighment, receipt and stock records for the scrap;
- original invoices, credit notes and debit notes;
- GST registration and classification evidence;
- the notification analysis and calculation working paper;
- ledger entries for gross liability, TDS payable and supplier payable;
- bank advice showing the net payment; and
- deposit, return, statement or certificate evidence required by the applicable regime.
Keep the original invoice values intact. Post the deduction in a separate payable or statutory-liability account so that purchase value and input-tax records remain traceable to the document issued by the supplier.
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Common errors and how to correct them
Applying 2% to every invoice containing the word “scrap”
Why it fails: The recommendation refers to metal scrap in a registered-person B2B supply, and the press release does not define every covered classification. Correction: retain the classification and registration checks and wait for the operative scope where necessary.
Using the invoice grand total without checking the base
Why it fails: The GST treatment of the base is not established by the recommendation. Correction: record the notification clause and calculate only on the defined amount.
Replacing taxable value with the net amount after deduction
Why it fails: Invoice tax fields and payment deductions serve different purposes. Correction: preserve taxable value and GST exactly as invoiced and record TDS separately.
Using section 194Q logic for GST TDS
Why it fails: The income-tax circular’s GST exclusion and timing rules belong to section 194Q. Correction: apply them only to a transaction actually governed by that income-tax provision.
Calling a TCS statement a GST TDS return
Why it fails: Form 143 reporting for specified transactions is a separate income-tax process. Correction: identify the legal mechanism before naming the ledger account or report.
Reconciling only the bank amount
Why it fails: A net payment can hide an incorrect base, duplicate deduction or missing statutory record. Correction: match invoice, calculation, ledger, bank payment and deposit or return reference as one chain.
Quick Recap
Final pre-payment checklist
- Have you identified GST TDS, income-tax TDS or TCS as the applicable mechanism?
- Is the seller’s registration, buyer’s registration and B2B status documented?
- Is the metal-scrap classification within the operative scope?
- Is the transaction date within the rule’s effective period?
- Is the deduction base taken from the operative rule rather than a default setting?
- Are goods value, taxable value, GST rate, GST amount, deduction and net payment separate fields?
- Can a reviewer reproduce the formula from the recorded base and rate?
- Are invoice, scrap-stock, wastage and payment records retained?
- Are any income-tax 194Q or Form 143 obligations assessed separately?
- For dates on or after 1 April 2026, have you checked the current section 393 table item rather than relying on an obsolete section number?
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