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Scrap-sale GST and income-tax reporting are separate filings. Report the outward supply in GSTR-1 using the invoice, recipient category, value, place-of-supply and correct HSN/SAC details. If the transaction also meets the applicable income-tax conditions for collection at source, the seller collects TCS from the buyer and reports that collection through the prescribed income-tax statement. It is not TDS deducted from the seller’s income.
The Income Tax Department pages commonly used for section 206C and Form 27EQ describe an earlier statutory framework. They do not establish the law, rates, thresholds or fields applicable to transactions on or after 1 April 2026. Verify the statute, forms and due dates for the transaction date before filing.
What you actually have to report
A scrap sale can create two different compliance tracks:
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| Question | GST outward-supply reporting | Income-tax collection-at-source reporting |
|---|---|---|
| Purpose | Record the seller’s outward supply and GST details | Report tax collected from the buyer under the applicable income-tax provision |
| Statement identified in the official guidance | GSTR-1 | Form 27EQ under the section 206C framework |
| Typical data | Invoice number and date, recipient details, supply category, taxable value, tax, place of supply and HSN/SAC summary | Collection records and the buyer, transaction and tax details required by the current statement |
| Who sends the money | The seller charges and pays GST according to the applicable return process | The seller collects TCS from the buyer and deposits and reports it as required |
| Main uncertainty for a 2026 transaction | Classification and rate must follow the current GST schedule and return instructions | The cited section 206C and Form 27EQ material has not been verified for transactions from 1 April 2026 onward |
A GSTR-1 entry does not replace an income-tax TCS statement. Conversely, reporting TCS does not satisfy the GST outward-supply requirement.
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First decide whether the item is legally “scrap”
Commercial language is not enough. The section 206C material published by the Income Tax Department describes scrap 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.” That definition is narrower than everyday uses of “scrap.”
Material that needs closer examination
- Manufacturing waste or off-cuts that cannot be used as the same material without processing.
- Broken, worn or cut material that is definitely unusable in its existing form.
- Used, surplus, obsolete or second-hand goods that remain usable. These should not automatically be treated as statutory scrap.
- Items sold as lots where some units are usable and others are waste. Document the basis for the classification instead of applying one label to the entire lot without analysis.
For GST, determine the actual goods, condition and intended classification. The official GSTR-1 guidance does not create one universal “scrap” HSN or GST rate. Metal, plastic, paper, electronic waste and other materials can fall under different classifications, and the rate depends on the current law.
GST workflow: report the outward supply in GSTR-1
1. Confirm registration and return status
Establish whether the seller is a registered taxpayer required to furnish GSTR-1 for the period. Determine whether the transaction is taxable, nil-rated, exempt or outside GST under the rules that apply to the goods and the seller. Registered filers may still have to submit a nil return when there is no reportable activity, according to the GSTR-1 guidance.
Do not decide GST treatment solely from the word “scrap” on a sales order. The description, condition, legal classification and place of supply should support the treatment used in the return.
2. Create the invoice or other required document
Prepare the document required for the transaction and retain the evidence supporting it. The record should make the following clear:
- Precise material description and condition.
- Quantity and unit of measure, with weighing or lot records where relevant.
- Invoice serial number and date.
- Seller and recipient legal names, addresses and GST identification details where applicable.
- Place of supply and whether the movement is intra-state or inter-state.
- Taxable value, tax charged and the classification used.
- Transport, delivery, weighbridge, purchase-order and payment evidence when those records exist.
CBIC invoice rules address invoice serial-number reporting through GSTR-1. Keep the numbering sequence and supporting documents consistent with the books.
3. Choose the recipient and supply category
Report an invoice to a registered recipient at invoice level using the category applicable to the period’s GSTR-1. For an unregistered customer, use the applicable unregistered-customer summary or invoice category. The GST Portal guidance distinguishes these structures, and its table thresholds and interface labels can change; follow the instructions displayed for the return period rather than relying on an old screenshot or remembered table number.
4. Enter the HSN/SAC summary
Include the supply in the relevant HSN/SAC summary using the classification that matches the material and the current GST instructions. The portal guidance states that, from the May 2025 return period, the HSN summary format uses separate B2B and B2C tabs. Select the tab that corresponds to the recipient category and enter the quantity, unit, value and tax information required by the current interface.
Never select an HSN merely because a buyer calls the goods scrap. If the classification is uncertain, resolve it before filing or obtain professional advice; changing the description after filing can create reconciliation and amendment work.
5. Validate and submit the period’s GSTR-1
Use the portal validation and preview functions before submission. Check that invoice totals, recipient GSTINs, taxable values, tax amounts and HSN summaries agree with the source records. Submit the statement through the current authentication process and retain the acknowledgement.
The official guidance identifies portal preparation, an offline tool and third-party ASP/GSP channels as available preparation routes. A preparation channel does not change the seller’s responsibility for classification, figures or filing deadlines.
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After filing, reconcile GSTR-1 with the corresponding GST liability return, sales register, invoice series, e-invoice or transport records where applicable, bank receipts and the buyer’s account. The material cited here establishes GSTR-1’s outward-supply role; it does not prescribe every GSTR-3B field or special-case adjustment. Use the current instructions for the liability return and correct errors through the permitted amendment process.
Income-tax reporting: when the issue is TCS, not TDS
Searches often say “TDS on scrap sale,” but the section 206C framework described by the Income Tax Department is a tax collected at source mechanism. The seller collects the tax from the buyer. It is not tax deducted from the seller’s own receipt or income.
Check the statutory conditions before collecting
The cited section 206C page sets out conditions relating to the seller, the nature of the goods and the transaction. A business that sells something colloquially called scrap is not automatically required to collect TCS. Apply the definition and statutory conditions in force on the sale date, including any later amendments, exclusions, thresholds or rate changes.
Because the supplied official material has not established the post-1 April 2026 law, do not copy an older percentage, threshold or exemption into a 2026 return. Confirm the current section, subordinate rules, notifications and form instructions before issuing a debit note for TCS or accepting a buyer’s declaration.
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Where current law requires collection, make the commercial documents and ledger entries understandable to both parties. Identify the base on which the collection is calculated, the amount collected, the date of collection, the buyer’s tax details and the payment or credit event that triggered collection under the current rule. Keep proof of deposit and the certificate or other statement issued to the buyer when required.
Do not describe the amount as GST in the invoice, and do not net it silently against the sale value. GST and TCS have different legal bases and different reporting trails.
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. That page lists these quarter-based dates:
| Quarter ending | Date stated 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 describe the page’s framework, not a guarantee for a transaction in the current year. Confirm that Form 27EQ remains the prescribed statement, and verify the applicable calendar, utility version, data fields and correction procedure for the year in which the collection occurred.
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- Buyer name, address and tax identification details required by the current form.
- Invoice or contract reference, sale date and description of the goods.
- Amount on which TCS was collected and the amount actually collected.
- Date of collection, deposit challan details and accounting entries.
- Evidence supporting why the transaction met, or did not meet, the statutory scrap conditions.
- Copies of certificates, acknowledgements and correction statements, if any.
Keep the TCS register separate from the GST outward-supply register, then cross-reference the invoice number so a reviewer can trace both filings without treating them as the same tax.
Common mistakes and how to correct the process
Calling every used item scrap
Problem: A usable machine, vehicle part or surplus inventory is labelled scrap without testing the statutory definition.
Fix: Record the item’s condition, usability and origin. Reassess GST classification and TCS applicability from the facts, not the sales description.
Using one GST rate or HSN for all scrap
Problem: The seller assumes a generic scrap rate.
Fix: Identify the material and current tariff classification for each product group. Preserve the reasoning and update the HSN summary when the return-period instructions change.
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Problem: The seller adds the income-tax collection to a GST table or treats a GSTR-1 acknowledgement as proof of TCS reporting.
Fix: Keep the outward-supply entry in GSTR-1 and complete the current income-tax TCS statement separately when the statutory conditions apply.
Reusing pre-2026 rates or due dates
Problem: An old article, spreadsheet or software setting supplies the percentage, threshold or form for a transaction after 1 April 2026.
Fix: Check the law and official form instructions for the sale date. Record the version or notification used in the workpapers.
Ignoring recipient status
Problem: A registered-recipient invoice is reported in an unregistered summary, or the HSN summary is placed in the wrong B2B/B2C tab.
Fix: Validate the recipient’s GSTIN and status before filing and reconcile the invoice category to the HSN tab used for the May 2025-and-later format.
Failing to reconcile after submission
Problem: The invoice exists in the books but not in GSTR-1, or the return value differs from the ledger and TCS register.
Fix: Run a period-end match by invoice number, date, recipient, taxable value, GST, TCS and payment status. Investigate differences while amendment windows and correction procedures are still available.
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A practical filing checklist
- Identify the material, condition, source and recipient.
- Test whether the goods meet the applicable legal definition of scrap.
- Determine GST status, place of supply, HSN/SAC and rate under current rules.
- Issue the correct invoice or other document and preserve quantity and delivery evidence.
- Report registered-recipient and unregistered-customer supplies in the correct GSTR-1 category.
- Complete the applicable HSN/SAC summary, including the correct B2B or B2C tab where required.
- Reconcile GSTR-1 to the books and the GST liability return.
- Separately test whether income-tax TCS applies under the law in force on the sale date.
- If TCS applies, collect it from the buyer, deposit it and prepare the prescribed statement.
- For any sale on or after 1 April 2026, verify the current section, rate, threshold, form, fields and due date before final submission.
What to verify for a transaction dated 1 April 2026 or later
The official pages cited for section 206C and Form 27EQ are useful descriptions of the earlier framework, but they do not establish post-commencement requirements. Before filing a later transaction, obtain current primary-source confirmation of:
- The section or rule that governs the sale and whether the statutory definition still applies.
- The seller and buyer conditions, exclusions and monetary thresholds.
- The collection rate and the point at which collection is due.
- The prescribed statement, utility, reporting fields and correction mechanism.
- The deposit and quarterly filing calendar.
- Any interaction with revised income-tax return reporting, if a separate return field is required.
Apply the verified income-tax treatment independently of the GST treatment. A correct HSN entry cannot cure an incorrect TCS decision, and a valid TCS statement cannot cure an omitted or misclassified outward supply.
Frequently Asked Questions
Is TCS on a scrap sale reported in GSTR-1?
No. GSTR-1 reports the outward supply and its GST details. TCS, when required under the income-tax law, is collected from the buyer and reported separately through the prescribed income-tax statement.
Which form is used for scrap-sale TCS?
The cited Income Tax Department framework identifies Form 27EQ as the quarterly TCS statement under section 206C. Confirm that the form and its fields remain prescribed for the transaction year, especially for sales on or after 1 April 2026.
Can every second-hand or surplus item be treated as scrap?
No. The cited section 206C definition concerns waste or scrap from manufacture or mechanical working that is definitely unusable as such. Usable second-hand or surplus goods require separate classification analysis.
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