Scrap-sale reporting has two separate tracks in India: report the outward supply and GST details in GSTR-1, and, only when the applicable income-tax conditions are met, report tax collected from the buyer through the relevant TCS statement. A GST return does not replace an income-tax TCS statement.
The term “scrap-sale TDS” is commonly used in searches, but the seller-side obligation described under section 206C is tax collected at source (TCS). The seller collects the tax from the buyer; it is not TDS deducted from the seller’s own receipt. The section 206C and Form 27EQ material discussed below reflects the framework shown on the cited Income Tax Department pages and is not verified advice for transactions on or after 1 April 2026. Check the law, rates, thresholds, forms and due dates applicable to the actual sale date before filing.
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What you must report—and where
A scrap sale can create two different compliance records. GST reporting describes the outward supply: what was sold, to whom, for how much, where the supply is treated as taking place, and which classification and tax treatment apply. Income-tax TCS reporting records tax collected from a buyer when the statutory conditions for collection are satisfied.
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| Question | GST outward-supply reporting | Income-tax TCS reporting in the cited section 206C framework |
|---|---|---|
| Purpose | Record outward supplies and associated GST details | Report tax collected at source from buyers |
| Main form or statement | GSTR-1 | Form 27EQ, described as a quarterly TCS statement under section 206C |
| Core information | Invoice, recipient category, value, place of supply, tax treatment and HSN/SAC summary | Collection records and the collectee and transaction information required by the applicable statement |
| Important limitation | HSN and GST rate depend on the actual material and current GST rules; there is no universal “scrap” rate established by the material cited here | The cited section 206C and Form 27EQ pages do not establish the law or filing fields applicable after 1 April 2026 |
Keep the two ledgers separate in your process. The same invoice may support both filings, but entering it in GSTR-1 does not report TCS, and filing Form 27EQ does not satisfy GST outward-supply reporting.
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First decide whether the item is legally “scrap”
Do not classify every used, surplus or second-hand item as scrap merely because the buyer calls it scrap. The Income Tax Department’s section 206C page describes scrap narrowly as “waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons.” The description points to material generated from manufacturing or mechanical working and rendered definitely unusable in its existing form.
Evidence to retain for the classification
- A precise description of the material, rather than only the word “scrap”.
- How it arose—for example, cutting, breakage, wear or another manufacturing process.
- Its condition and why it is not usable as such.
- Quantity, unit of measure, weight where relevant, and the method used to determine quantity.
- Photographs, weighbridge slips, internal disposal records, inspection notes or buyer correspondence when those records are part of your normal controls.
A reusable machine, working component, excess inventory or second-hand article may require a different GST and income-tax analysis. Obtain advice based on the material and transaction facts instead of applying a scrap label automatically.
GST: prepare the sale for GSTR-1
GSTR-1 is the GST statement of outward supplies for normal and casual registered taxpayers. The GST Portal guidance covers invoice details, recipient summaries and HSN/SAC summaries. Your first task is to establish the seller’s registration and return status and then determine whether the transaction is taxable, nil-rated, exempt or outside GST under the rules applicable to the material and sale.
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Step 1: Confirm registration and the return period
- Confirm the seller’s GSTIN, registration status and the return period in which the time of supply falls under the applicable rules.
- Check whether the seller is required to file GSTR-1 for that period. The portal guidance also contemplates a nil return for a registered filer where there is no reportable activity.
- Determine whether the sale is a domestic supply, an inter-State supply or another category requiring a specific treatment under current GST rules.
Step 2: Issue the appropriate document
Create the tax invoice or other document required for the transaction. The description should identify the material, grade or type where relevant, quantity, unit price, taxable value and any other information needed to support the classification. CBIC invoice rules address invoice serial-number requirements and the reporting of invoice information through GSTR-1.
- Use a consecutive, unique invoice number within the permitted series.
- Record the invoice date, seller details and recipient details.
- Capture the recipient GSTIN when the buyer is registered; for an unregistered buyer, record the legally required identifying and place-of-supply details.
- State quantity, unit, value, applicable tax components and the total amount.
- Preserve weighment, delivery, transport and payment records that substantiate the invoice.
Step 3: Choose the correct recipient category
Registered-recipient invoices are reported at invoice level in the applicable GSTR-1 category. Sales to unregistered customers are reported in the applicable unregistered-supply category, either as a summary or at invoice level as required by the return-period instructions and the transaction’s value and place-of-supply conditions. Portal tables and thresholds can change, so use the current GSTR-1 guide shown for your filing period rather than relying on an older screen or article.
Step 4: Establish HSN/SAC and GST treatment
There is no single HSN code or GST rate for all scrap. Identify the actual material and its condition, then verify the classification and rate under the GST tariff and notifications applicable on the supply date. A broad invoice description such as “miscellaneous scrap” can make the classification difficult to defend.
Enter the applicable HSN/SAC information in the HSN summary. The GST Portal guide notes that, from the May 2025 return period, the HSN summary format changed to separate B2B and B2C tabs. Follow the interface and validation rules displayed for the period you are filing.
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Step 5: Submit and reconcile
- Prepare the GSTR-1 data in the GST Portal, the portal’s offline tool, or an authorised third-party application channel. The existence of an application channel is not an endorsement of any particular provider.
- Validate invoice numbers, dates, recipient GSTINs, place of supply, taxable values, tax amounts and HSN/SAC entries before submission.
- Submit or file the return using the authorised signatory or electronic verification method required for the account.
- Reconcile the filed outward-supply data with the sales register, invoice copies, weighment records, e-way or transport records where applicable, bank receipts and the corresponding GST-liability return.
The cited material establishes GSTR-1’s outward-supply role, but it does not specify every GSTR-3B field or every special-case adjustment. Use the current instructions for the liability return, credit notes, amendments, advances and other exceptions.
Income-tax side: determine whether TCS applies
Under the section 206C framework shown on the Income Tax Department page, a qualifying seller collects tax from the buyer on qualifying transactions. The page describes who can be a seller, the timing and rate framework in the statute displayed there, and the statutory definition of scrap. Applicability depends on all of the statutory conditions; selling something informally called scrap is not, by itself, enough.
Do not confuse TCS with TDS
TDS is generally tax withheld by the payer from a payment to the recipient. TCS is tax collected by the seller from the buyer and deposited under the collection provisions. In a scrap sale where section 206C applies, the seller’s record should show the amount collected from the buyer and the buyer’s details required for reporting. Do not describe the amount as tax deducted from the seller’s income.
Questions to answer before collecting
- Is the seller within the statutory class covered by the applicable section 206C provision?
- Does the material meet the statutory scrap definition, including the manufacturing or mechanical-working and unusable-as-such elements?
- Is the buyer and transaction within any exclusion, exception or changed rule applicable on the sale date?
- What rate, threshold, collection point and identification details apply under the law in force for that date?
The sources used here do not verify the post-1 April 2026 law. Therefore, do not copy an old percentage, threshold or exemption into a current invoice without checking the current Act, rules, notifications and departmental guidance.
Which form is used for scrap-sale TCS?
The Income Tax Department’s Form 27EQ page describes Form 27EQ as the quarterly statement for TCS under section 206C. It lists the following quarter-based due dates:
| Quarter ending | Date shown on the cited Form 27EQ page |
|---|---|
| 30 June | 15 July |
| 30 September | 15 October |
| 31 December | 15 January |
| 31 March | 15 May of the following year |
Those dates are the dates stated on that page, not a guarantee that the same form or calendar applies to a transaction in the current year. Confirm the form version, filing mechanism, due date, correction process and applicable law for the period in which the collection was made.
Build the TCS records during the sale
- Record the buyer’s legal name, address and tax identifier details required by the current statement.
- Link the collection to the invoice, sale date, material description, quantity and value.
- Show separately in your books the sale value, GST amounts where applicable and TCS collected from the buyer.
- Retain evidence of collection and deposit, including payment references and any certificate or statement generated under the current system.
- Prepare the quarterly statement from the transaction register, then reconcile it to the general ledger, bank statement and buyer-facing documents.
How the two filing tracks fit together
Use one controlled transaction record but two reporting checklists. For example, a registered business sells unusable manufacturing off-cuts to a registered buyer. The invoice and material evidence support the GST classification. The invoice is reported in the appropriate B2B section of GSTR-1, and the HSN summary is completed using the current B2B tab. Separately, the business tests the statutory section 206C conditions and, if they are met under the law applicable on the sale date, records and reports the TCS in the applicable quarterly statement. If the section 206C test is not met, there is no TCS merely because the invoice appears in GSTR-1.
For a sale to an unregistered buyer, the GST recipient category changes, but the income-tax analysis still turns on the statutory seller, material and transaction conditions. Do not use the buyer’s GST registration status as a substitute for the section 206C test.
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Calling every used item scrap
Problem: A used asset or surplus stock is described as scrap without evidence that it is waste from manufacture or mechanical working and definitely unusable as such.
Fix: Document the source and condition of the material and obtain a classification opinion where the facts are uncertain.
Using one GST rate for all scrap
Problem: “Scrap” is treated as a universal tariff category.
Fix: Identify the material and verify the current HSN and rate. Keep the classification reasoning with the invoice file.
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Problem: The seller assumes that entering the invoice in GSTR-1 also reports the income-tax collection.
Fix: File the applicable income-tax TCS statement separately and reconcile the collection to the same transaction record.
Calling the collection TDS
Problem: Books and buyer communications say tax was deducted from the seller.
Fix: Label the amount as TCS collected from the buyer where the applicable provision requires collection.
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Problem: A prior-year Form 27EQ calendar or section 206C rate is copied into a later transaction.
Fix: Check the law and form applicable to the sale date, especially for transactions on or after 1 April 2026.
Leaving the HSN summary unreconciled
Problem: Invoice-level entries and the HSN summary do not agree.
Fix: Compare the HSN summary with the sales register before filing and investigate differences by material, recipient category and return period.
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Practical month-end and quarter-end checklist
- Confirm every scrap-sale invoice has a specific material description and supporting quantity or weight record.
- Verify the invoice series, date, recipient GSTIN or unregistered-customer details and place of supply.
- Check the GST classification, HSN/SAC and rate against the law in force on the supply date.
- Map each invoice to the correct GSTR-1 recipient category and HSN tab.
- Reconcile GSTR-1 values with the sales register and GST-liability return.
- Run the section 206C applicability test separately for each relevant transaction or defined class of transactions.
- Record TCS collected, buyer identification details and deposit references in a dedicated TCS register.
- Verify the current Form 27EQ requirement, format and due date before preparing the quarterly statement.
- Retain invoices, contracts, weighment slips, classification notes, payment proof, filed-return acknowledgements and correction records.
- Escalate unusual materials, related-party transactions, mixed supplies, returns, credit notes or post-sale reclassification to a qualified tax professional.
What to verify for transactions after 1 April 2026
The official pages cited for section 206C and Form 27EQ do not establish the current post-1 April 2026 thresholds, rates, exemptions, return fields or even whether the same form and calendar remain the correct ones for every transaction. Before filing a later-period return, verify the enacted law, amendments, rules, official forms, portal instructions and departmental notices for the relevant financial year. Date-stamp your internal procedure and update it when the primary sources change.
For GST, likewise use the current portal guide and tariff information for the return period. The HSN summary change beginning with the May 2025 return period illustrates why an older screenshot or checklist can be misleading even when the underlying invoice has not changed.
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Use a single transaction ID
Assign one internal ID to the invoice, weighment document, delivery record, GST entry, TCS register line and bank receipt. This makes it possible to trace a discrepancy without searching by a vague description such as “metal scrap”.
Separate classification from filing
Have one person or review step establish what the material is and whether it is unusable as such. A second step can map the approved description to the current HSN and decide the GSTR-1 category. This reduces the risk that a familiar code drives the material description.
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At invoice approval, record the GST rules and income-tax provisions checked for the sale date. Do not allow a prior-year rate or threshold to flow automatically into a new financial year without confirmation.
Reconcile independently
Complete a GST reconciliation and a TCS reconciliation as separate sign-offs. The GST sign-off should cover invoices, values, tax and HSN/SAC. The TCS sign-off should cover statutory applicability, collection, buyer details, deposit and the quarterly statement.
Direct answers to the three common questions
Is TCS on scrap sale reported in GSTR-1?
No. GSTR-1 reports the outward supply and its GST information. TCS, when required under the applicable income-tax provision, is reported separately through the prescribed income-tax statement.
Which form is used for scrap-sale TCS?
The cited Income Tax Department material describes Form 27EQ as the quarterly TCS statement under section 206C. Confirm that this form and its fields remain applicable to the transaction year, particularly for sales on or after 1 April 2026.
Can every scrap sale be reported the same way?
No. GST treatment depends on the actual material, classification, recipient and place-of-supply facts. Income-tax TCS depends on the statutory definition and conditions, not simply on the commercial label “scrap”.
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