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There is no defensible single GST TDS threshold for scrap in the official material available here. The 54th GST Council meeting recommended a 2% TDS on business-to-business supplies of metal scrap by a registered person, but the CBIC press release is a recommendation record, not the operative notification. Before deducting tax, confirm the notification that sets the effective date, threshold, taxable base, covered goods and exceptions.
For a registered seller, a section 51 amount that is successfully claimed is credited to the electronic cash ledger, not the electronic credit ledger used for input tax credit. An eligible cash-ledger balance may be refundable under the GST refund procedure, but a refund is not automatic: the correct return or application, reconciliation and supporting records are required.
What GST TDS on scrap means
GST TDS is a collection mechanism under section 51 of the Central Goods and Services Tax Act. A notified deductor withholds a specified amount from a payment for a taxable supply, reports the deduction through the prescribed GST process and deposits it with the government. The supplier does not treat that amount as ordinary input tax credit. Once the registered supplier claims the amount through the prescribed process, the payment rules place it in the supplier’s electronic cash ledger.
For metal scrap, the important distinction is between a policy recommendation and an enforceable rule. The CBIC press release for the 54th GST Council meeting, dated 9 September 2024, records this recommendation:
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“A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.”
The wording identifies the proposed rate and the broad transaction setting—metal-scrap supply, registered supplier and B2B—but the press release does not itself establish every operational condition. It does not supply the notification number, a confirmed threshold, an effective date, the precise rate base or all exceptions. Read the press release at CBIC’s 54th GST Council meeting release, then verify the later central and corresponding state or Union territory notifications before acting.
Is there a GST TDS limit for scrap?
Do not publish or rely on a number as the scrap threshold unless it appears in the operative notification applicable to the transaction. The official material identified for this explanation reports the Council’s 2% recommendation but does not expose the threshold text. A press release cannot substitute for the notification that creates a legal obligation.
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- Effective date: the date from which a registered buyer must begin deducting.
- Threshold test: whether the limit is measured per invoice, contract, supplier, transaction or another prescribed basis.
- Tax base: whether the percentage applies to the taxable value alone or another amount defined by the rule.
- Scope of goods: which metals, headings or descriptions qualify as metal scrap.
- Transaction scope: whether the rule is limited to B2B supplies and which registered parties are covered.
- Exceptions: any excluded transactions, persons, locations or supply types.
Until those points are checked, the safe answer to “What is the GST TDS limit for scrap?” is that the threshold is not stated in the cited CBIC recommendation release. A buyer should pause a deduction decision rather than infer a threshold from the 2% figure.
How to verify an operative rule
- Start with the CBIC release to understand the Council recommendation and its wording.
- Search the current CBIC notifications and amendments for a metal-scrap TDS notification issued under section 51.
- Check the corresponding state or Union territory treatment where the supply involves CGST and SGST or UTGST.
- Read the notification’s definitions, threshold clause, effective date and transitional language together; do not rely on a headline or a secondary summary.
- Keep a copy of the notification in the transaction file and record the date on which its conditions were tested.
For general GST explanations, CBIC also maintains sectoral FAQs. FAQs can help with terminology, but the operative notification controls the deduction.
How the section 51 amount is credited to a seller
The payment rules describe the ledger result for a registered person from whom TDS was deducted. The seller must claim the amount through the prescribed GST process; after that claim, the amount is credited to the seller’s electronic cash ledger.
- Identify the deduction. Match the buyer’s deduction information to the relevant invoice, customer GSTIN, tax period and supply value.
- Check the supplier record. The payment rule refers to an amount deducted under section 51 and claimed by the registered person from whom it was deducted. Resolve mismatched GSTINs, periods or amounts before claiming.
- Claim through the prescribed process. Use the current return or portal procedure applicable to the section 51 amount. The exact screens and validations can change, so follow the live instructions attached to the relevant return.
- Confirm the ledger posting. After acceptance, verify that the amount appears in the electronic cash ledger, with the correct tax period and source.
- Use or preserve the balance. The cash-ledger balance can generally support eligible GST payments, or it may form the basis of a refund claim when the refund rules permit one.
This is a cash balance, not input tax credit. Calling it “ITC” can lead to an incorrect return entry, an overstated credit balance or a rejected reconciliation.
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Electronic cash ledger versus electronic credit ledger
| Feature | Electronic cash ledger | Electronic credit ledger |
|---|---|---|
| Section 51 TDS credit | Credited after the registered deductee claims the deducted amount under the prescribed process. | Section 51 TDS is not credited here. |
| Typical source | Amounts paid or credited through GST payment mechanisms, including a claimed section 51 deduction. | Eligible input tax credit reported under GST law. |
| Refund reference in the rules | Section 49(6) permits a claim relating to a balance in this ledger, subject to procedure and eligibility. | The cash-ledger refund route does not turn an ITC balance into cash. |
| Practical reconciliation | Match the deduction claim, posting and later use or refund. | Reconcile purchase records and eligible input tax credit separately. |
The CBIC GST Payment Rules are the primary reference for the section 51 ledger mechanism. Keep the two ledgers separate in accounting software and in the control account used for monthly reconciliation.
Can GST TDS on scrap be refunded?
A balance in the electronic cash ledger can be the subject of a refund claim under section 49(6), but eligibility and filing depend on the facts and the applicable refund category. The refund rules say that a claim relating to an electronic cash-ledger balance may be made through the return for the relevant period and list GSTR-7 among possible return routes where applicable. For other refund categories, the general electronic application is FORM GST RFD-01, subject to the category-specific requirements.
Practical refund sequence
- Reconcile first. Compare the deduction shown by the deductor with the supplier’s invoices, return period and electronic cash-ledger entry. Correct a data mismatch before filing.
- Classify the balance. Establish that the amount is an eligible cash-ledger balance rather than an electronic credit-ledger balance, an unpaid deduction or an amount belonging to the deductor.
- Select the route. Use the relevant return route when the rules provide one, including GSTR-7 where it is the applicable route. Use RFD-01 for a refund category that requires the general application.
- Attach evidence. Keep deduction statements, invoices, contracts, return acknowledgements, ledger extracts, bank details and any declaration or undertaking required for the selected category.
- Check the filed amount. Ensure the refund requested agrees with the reconciled cash-ledger balance and does not include amounts already used to discharge output liability.
- Monitor queries. Respond to a deficiency memo or clarification request within the time and format stated by the proper officer or portal.
The CBIC GST Refund Rules contain both the cash-ledger provision and the RFD-01 procedure. A balance appearing in the ledger is not a promise that the whole amount will be sanctioned; the claim still has to satisfy the applicable rule and documentary checks.
Deductor excess versus deductee credit
CBIC’s refund guidance distinguishes an excess balance held by the deductor from TDS or TCS that has already been paid and credited to the deductee. An excess amount that has reached the deductee’s electronic cash ledger may be adjusted against output liability or claimed under the excess cash-ledger refund category, depending on the current rules and the facts. The distinction matters: the deductor cannot simply reclaim money that has already been credited to the supplier, and the supplier should not claim an amount that never posted to its ledger.
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That distinction is discussed in CBIC Circular No. 125/44/2019-GST. Because the circular is from 2019, use it with the current refund rules and any later amendments rather than treating it as a stand-alone answer.
TDS and reverse charge are different mechanisms
The same 54th Council press release records a separate recommendation for reverse charge on metal scrap supplied by an unregistered person to a registered person. Reverse charge changes who accounts for the GST on the supply; TDS is a withholding and reporting mechanism. They should not be combined in one invoice calculation without checking the operative notifications.
| Question | Registered-person B2B metal scrap | Unregistered-to-registered metal scrap |
|---|---|---|
| Recommendation recorded in the 54th Council release | 2% TDS recommendation for a supply by a registered person. | Reverse-charge recommendation for supply by an unregistered person to a registered person. |
| What is legally established by that release alone? | The recommendation is recorded; operative threshold, date, base and exceptions require the notification. | The recommendation is recorded; operative liability and registration effects require the notification. |
| Immediate control | Confirm whether the buyer, seller, goods and transaction meet the operative TDS rule. | Confirm whether the reverse-charge notification applies before deciding who reports and pays GST. |
Do not assume that an unregistered seller automatically creates a current reverse-charge liability, or that every scrap transaction is subject to TDS. Confirm the notification in force for the transaction date.
What GST rate applies to scrap?
“Scrap” is not one universal GST classification. The CBIC rate-table result displays ferrous waste and scrap under heading 7204 at 9% CGST plus 9% SGST or UTGST, a combined 18% for that displayed entry. That figure is not a blanket rate for every material described commercially as scrap.
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| CBIC rate-table entry | CGST | SGST/UTGST | Combined display |
|---|---|---|---|
| Ferrous waste and scrap, heading 7204 | 9% | 9% | 18% |
Classify the actual goods by composition, condition and tariff heading, then check the current rate notification. The rate applicable to the supply and the percentage used for a TDS deduction are separate questions: an 18% GST rate does not, by itself, prove a TDS threshold or define the TDS base.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Illustrative arithmetic— not a filing instruction
If a future operative notification applied a 2% deduction to a defined taxable base of ₹100,000, the arithmetic would be ₹2,000. This example only shows how a percentage works. It does not establish that ₹100,000 is above a threshold, that the base is the invoice total, or that the 2% recommendation is currently enforceable for a particular scrap transaction. Use the notification’s own base and threshold wording.
Checklist for each party
Scrap seller
- Confirm your GST registration status and the customer’s status for the transaction date.
- Identify the material and tariff heading; do not rely on the commercial word “scrap” alone.
- Obtain the operative TDS notification before accepting a deduction.
- Reconcile the buyer’s deduction data with invoices and the cash-ledger posting.
- Claim the amount through the prescribed process and retain evidence of the posting.
- Decide whether to use the balance for eligible payments or pursue a refund under the applicable route.
Buyer or deductor
- Verify that the supply, supplier status and B2B conditions fall within the operative rule.
- Apply the threshold and tax-base test exactly as the notification states.
- Keep the notification version, calculation, invoice list and deduction report together.
- Do not label a reverse-charge payment as TDS or a TDS amount as input tax credit.
- Investigate any excess or duplicate deduction before the amount is claimed by the supplier.
Accountant or reviewer
- Record the notification number and effective date used in the working paper.
- Maintain separate control accounts for TDS cash credits, output liability, input tax credit and refund claims.
- Reconcile supplier-wise, period-wise and GSTIN-wise rather than relying only on a net ledger total.
- Check whether a refund claim belongs under a return route or RFD-01 and preserve the relevant acknowledgement.
Common mistakes and how to correct them
Treating the 2% recommendation as the complete law
Why it fails: the press release does not provide the operative threshold, date, base or exceptions. Correction: obtain and cite the notification that applies on the supply date.
Calling the credit input tax credit
Why it fails: section 51 amounts claimed by a registered deductee go to the electronic cash ledger. Correction: reconcile and report the amount as a cash-ledger credit.
Refunding the wrong balance
Why it fails: a cash-ledger refund route is different from an electronic credit-ledger claim, and deductor excess is different from a deductee credit. Correction: identify the owner, source and ledger before selecting a form.
Using the 18% ferrous-scrap entry for every commodity
Why it fails: the rate table’s 7204 entry covers the goods described there, not every product sold as scrap. Correction: classify the actual material and verify the current rate.
Assuming reverse charge and TDS are interchangeable
Why it fails: one determines who accounts for GST on the supply; the other withholds a prescribed amount. Correction: test each mechanism against its own notification.
Official references to keep with the transaction file
- CBIC press release on recommendations of the 54th GST Council meeting, 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 practical conclusion is simple: use the 2% figure only as the Council’s recorded recommendation, not as proof of a current threshold. Confirm the operative notification, keep the section 51 amount in the electronic cash-ledger workflow, and choose the refund route only after reconciling the balance and its ownership.
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