From 1 November 2026, a GST-registered business that buys used cooking oil, plastic scrap, tyre scrap or e-waste from an unregistered seller must pay the GST itself under reverse charge (Notification 04/2026-Central Tax (Rate)). Pay it in cash at the normal rate for the goods (18% for plastic scrap and e-waste, 5% for tyre scrap and used cooking oil), issue a self-invoice within 30 days, and claim the tax back as ITC. If the seller is registered, there is no reverse charge; instead you deduct 2% GST TDS when the contract value exceeds Rs 2.5 lakh.
Key points on scrap reverse charge from 1 November 2026
- Four goods join the reverse charge list when a registered buyer purchases from an unregistered seller: used cooking oil (1518), plastic waste and scrap (3915), tyre waste and scrap (4004) and electrical and electronics waste and scrap (8549).
- Metal scrap of Chapters 72 to 81 has been under reverse charge since 10 October 2024. The new rules extend the same treatment to the other four categories.
- The seller's registration decides the route. Unregistered seller: reverse charge. Registered seller: 2% GST TDS under Section 51 for contracts above Rs 2.5 lakh. Never both on one purchase.
- Scrap suppliers lose the registration exemption for reverse-charge-only suppliers (Notification 06/2026-Central Tax).
- Reverse charge tax is paid in cash, and ITC is claimed after payment.
- E-invoicing of self-invoices for these purchases starts 1 January 2027, not now.
Scrap buying has long been the least formal part of a factory's supply chain. Plastic bales come from a kabadiwala with a handwritten slip, old tyres from a local collector with no GSTIN, and used cooking oil from a vendor who has never registered for anything. Until now the buyer booked the cost and moved on. From 1 November 2026 the buyer has to work out the GST on these purchases, pay it and report it.
What Changed on 1 November 2026
Three notifications dated 27 October 2026, all in force from 1 November 2026, do three separate jobs. A fourth, dated 26 October 2026, deals with e-invoicing from 2027.
| Notification | What it does | From |
|---|---|---|
| 04/2026-Central Tax (Rate), 27 Oct 2026 | Adds used cooking oil, plastic scrap, tyre scrap and e-waste to the reverse charge list in Notification 4/2017-CT(R) | 1 Nov 2026 |
| 06/2026-Central Tax, 27 Oct 2026 | Takes suppliers of these goods and metal scrap out of the registration exemption in Notification 5/2017-CT | 1 Nov 2026 |
| 07/2026-Central Tax, 27 Oct 2026 | Requires registered buyers of these goods and metal scrap from registered sellers to deduct GST TDS (amends Notification 50/2018-CT) | 1 Nov 2026 |
| 04/2026-Central Tax, 26 Oct 2026 | Extends e-invoicing to supplies received from unregistered persons under reverse charge, and to import of services | 1 Jan 2027 |
Matching Integrated Tax (Rate) notifications apply the same reverse charge entries to inter-state purchases.
Time of supply decides which rules apply. For goods taxed under reverse charge, Section 12(3) of the CGST Act fixes it at the earliest of the date you receive the goods, the date you pay the seller, or the 31st day after the seller's invoice. Goods received and paid for on or before 31 October 2026 fall under the old treatment.
The Four New Reverse Charge Entries
| S. No. in Notification 4/2017-CT(R) | Heading | Goods | GST rate (9/2025-CT(R)) |
|---|---|---|---|
| 2A | 1518 | Used cooking oil | 5% (Schedule I, S. No. 96) |
| 3B | 3915 | Waste and scrap of plastics | 18% (Schedule II, S. No. 116) |
| 3C | 4004 | Waste and scrap of tyres | 5% (Schedule I, S. No. 267, rubber scrap) |
| 9 | 8549 | Electrical and electronics waste and scrap | 18% (Schedule II, S. No. 521) |
For each entry the supplier column says "any unregistered person" and the recipient column says "any registered person". That is the whole trigger.
Classification comes first
What the seller writes on the slip does not settle the heading. Calling material "plastic residue" or "recycled granules" does not by itself make it 3915 scrap. Check what the goods actually are.
| What you are buying | Likely position |
|---|---|
| Post-consumer or factory plastic waste and scrap | 3915, covered |
| Recycled plastic granules sold as raw material | Check classification; may not be scrap |
| Discarded tyres, tyre waste and scrap | 4004, covered (5%) |
| Crumb rubber powder or granules made from tyre scrap | 4004 powders and granules, 18% (Schedule II, S. No. 130); check whether the seller's goods are still "waste and scrap" |
| Retreaded or used tyres sold for use | Heading 4012, not scrap; see our tyre retreading GST guide |
| Discarded circuit boards, electronic waste | 8549, covered |
| Used cooking oil collected from restaurants and hotels | 1518, covered |
Record the classification in the vendor master so the right tax treatment applies every time you buy.
Reverse Charge or GST TDS? The Split That Decides Your Liability
The two mechanisms never apply to the same purchase. Getting the split wrong means either short payment or a deduction you should not have made.
| Seller | Buyer | What applies |
|---|---|---|
| Unregistered | Registered | Reverse charge under Section 9(3) at the rate for the goods |
| Registered | Registered | GST TDS at 2% under Section 51 (1% CGST + 1% SGST, or 2% IGST), where the contract value exceeds Rs 2.5 lakh |
| Registered | Unregistered | Seller charges GST normally |
| Unregistered | Unregistered | No GST on the purchase |
The GST TDS side
Notification 07/2026-Central Tax rewrites clause (d) of Notification 50/2018-CT. Any registered person receiving used cooking oil, plastic scrap, tyre scrap, metal scrap or e-waste from another registered person is now a notified deductor under Section 51.
| Point | Detail |
|---|---|
| Rate | 2% of the taxable value, excluding GST |
| Threshold | Total value of supply under a contract above Rs 2,50,000 |
| Registration | A separate GST registration as a tax deductor (Section 24(vi)) |
| Return | GSTR-7 by the 10th of the following month; see our GSTR-7 guide |
| Seller's credit | Shows in the seller's electronic cash ledger once they accept it |
The Rs 2.5 lakh limit is per contract, not per invoice. A yearly rate contract worth Rs 30 lakh with a registered aggregator crosses it, so TDS applies to every payment under that contract.
The reverse charge side
| Point | Detail |
|---|---|
| Who pays | The registered buyer |
| Rate | The GST rate for the goods (table above) |
| Documents | Self-invoice under Section 31(3)(f) within 30 days of receipt (Rule 47A) and payment voucher under Section 31(3)(g) |
| Payment | Electronic cash ledger only |
| Liability in GSTR-3B | Table 3.1(d) |
| ITC in GSTR-3B | Table 4(A)(3) |
The credit ledger cannot be used. Tax payable under reverse charge is not "output tax" as defined in Section 2(82), and Section 49(4) allows credit to be used only for output tax. Using ITC here is treated as non-payment, with interest. For the wider rules on reverse charge, see our RCM under GST guide.
Worked Example: Plastic Scrap from an Unregistered Kabadiwala
A recycler in Hyderabad buys plastic scrap for Rs 1,00,000 from an unregistered collector in the same state in November 2026. Plastic scrap (3915) is taxed at 18%.
| Step | Amount |
|---|---|
| Value paid to the collector | Rs 1,00,000 |
| CGST 9% + SGST 9% under reverse charge | Rs 18,000 |
| Paid in cash through GSTR-3B | Rs 18,000 |
| ITC claimed in Table 4(A)(3) | Rs 18,000 |
| Net GST cost | Nil, if the scrap is used for taxable supplies |
The recycler issues a self-invoice for Rs 1,00,000 plus Rs 18,000 GST, marked as payable on reverse charge. No GST TDS is deducted, because the collector is unregistered.
The same scrap from a registered aggregator
Now the recycler buys plastic scrap worth Rs 5,00,000 under one contract from a registered aggregator.
| Step | Amount |
|---|---|
| Taxable value | Rs 5,00,000 |
| GST charged by the aggregator at 18% | Rs 90,000 |
| GST TDS at 2% of Rs 5,00,000 | Rs 10,000 |
| Paid to the aggregator (Rs 5,90,000 less TDS) | Rs 5,80,000 |
| TDS deposited and reported in GSTR-7 | Rs 10,000 |
| ITC on the aggregator's invoice | Rs 90,000 |
No reverse charge arises here. Paying reverse charge on this purchase as well would mean paying GST twice on the same goods.
Tyre scrap is cheaper to get wrong
If the same Rs 1,00,000 purchase were tyre scrap from an unregistered seller, the reverse charge would be Rs 5,000 at 5%, not Rs 18,000. Using 18% on tyre scrap overpays the tax. Using 5% on crumb rubber granules, which are 18%, underpays it.
The Registration Change for Scrap Suppliers
Notification 5/2017-Central Tax exempts persons who make only supplies taxed under reverse charge from registering. Notification 06/2026-Central Tax replaces its proviso so that the exemption does not apply to anyone supplying used cooking oil, plastic scrap, tyre scrap, metal scrap or e-waste, from 1 November 2026.
That does not mean every small collector must register. It means the special route is closed and the normal tests apply:
| Supplier situation | Registration |
|---|---|
| Aggregate turnover above the Section 22 limit for goods (Rs 40 lakh in most states; Rs 20 lakh in Telangana and some other states) | Must register |
| Turnover below the limit, intra-state sales only | Not required to register |
| Any inter-state supply of these goods | Must register regardless of turnover (Section 24) |
Our GST registration turnover limit guide sets out the state-wise limits. In practice the pool of unregistered sellers will shrink as larger collectors register, and each one that registers moves from the reverse charge column to the GST TDS column in your purchase process.
Step by Step: Paying Reverse Charge on a Scrap Purchase
Step-by-Step Guide
Reverse Charge on Scrap Bought from Unregistered Sellers
From goods receipt to ITC claim
Check the seller's GSTIN
Search the seller on the GST portal. An active GSTIN means GST TDS rules apply, not reverse charge. Record the status and the date you checked in the vendor master.
VerifyConfirm the heading and rate
Match the goods to 1518, 3915, 4004 or 8549 and pick the rate: 18% for plastic scrap and e-waste, 5% for tyre scrap and used cooking oil, 18% for rubber powders and granules.
ClassifyIssue a self-invoice within 30 days
Raise a self-invoice under Section 31(3)(f) within 30 days of receiving the goods (Rule 47A), showing your GSTIN, the seller's name and address, HSN, taxable value and tax payable on reverse charge.
Self-invoiceIssue a payment voucher
When you pay the seller, issue a payment voucher under Section 31(3)(g) and keep it with the self-invoice.
VoucherPay the tax in cash
Report the liability in GSTR-3B Table 3.1(d) and pay it from the electronic cash ledger. The credit ledger cannot be used.
Table 3.1(d)Claim the ITC
Claim the tax paid in GSTR-3B Table 4(A)(3), subject to the Section 16 conditions, including the Section 16(4) time limit.
Table 4(A)(3)Source: Sections 9(3), 12(3), 16, 31(3)(f) and (g), 49(4), CGST Act 2017; Rule 47A, CGST Rules 2017; Notification 04/2026-Central Tax (Rate)
E-invoicing from 1 January 2027
Notification 04/2026-Central Tax amends Notification 13/2020-CT so that e-invoicing covers supplies received from an unregistered person where the recipient pays tax under reverse charge. It applies from 1 January 2027. If your business is already under e-invoicing, your self-invoices for scrap bought from unregistered sellers will need an IRN from that date. Use November and December to check that your billing software can generate one. Our e-invoicing IRP guide explains the portal steps.
Common Mistakes to Avoid
| Mistake | Why it costs money |
|---|---|
| Deducting GST TDS from an unregistered seller | TDS applies only between registered persons; the seller cannot use it and your reverse charge is still unpaid |
| Paying reverse charge on a registered seller's invoice | The seller has already charged GST, so you pay twice |
| Paying reverse charge from the credit ledger | Section 49(4) bars it; treated as unpaid tax, with interest |
| Using 18% on tyre scrap or used cooking oil | Both are 5%; you overpay |
| Using 5% on crumb rubber granules | Rubber powders and granules are 18%; you underpay |
| No self-invoice, or one issued after 30 days | Breaks Rule 47A and weakens the ITC claim |
| Treating each invoice as below Rs 2.5 lakh | The GST TDS limit is per contract, not per invoice |
Composition dealers
A composition dealer is a registered person, so it falls within the new entries. Section 10(1) is subject to reverse charge under Section 9(3), so a composition unit buying scrap from an unregistered seller pays the tax at the normal rate in cash. It cannot claim ITC, so this tax is a real cost, not a pass-through.
Income tax TCS is separate
GST reverse charge does not replace income tax TCS on scrap. A seller of scrap still collects TCS under the Income-tax Act, 2025 on its sales. Our scrap dealers income tax guide covers the TCS rate, Form No. 127 and ITR filing, and our PVC pipe and plastic moulding guide shows how a plastics unit books reverse charge on the scrap it buys.
Key Points at a Glance
| Point | Detail |
|---|---|
| Effective date | 1 November 2026 |
| New reverse charge goods | Used cooking oil (1518), plastic scrap (3915), tyre scrap (4004), e-waste (8549) |
| Already covered | Metal scrap, Chapters 72 to 81, since 10 October 2024 |
| Rates | 18% plastic scrap and e-waste; 5% tyre scrap and used cooking oil |
| Reverse charge trigger | Registered buyer, unregistered seller |
| GST TDS trigger | Registered buyer, registered seller, contract above Rs 2.5 lakh, 2% |
| Payment | Cash ledger only |
| Documents | Self-invoice within 30 days, payment voucher |
| GSTR-3B | Table 3.1(d) liability, Table 4(A)(3) ITC |
| Supplier registration | Reverse-charge-only exemption withdrawn for these goods |
| E-invoicing of self-invoices | From 1 January 2027 |
Where Tax Garden Helps
The scrap reverse charge change is mostly a process problem. It needs:
- a vendor master that records each seller's registration status
- a self-invoice format that meets Rule 47A
- the discipline to pay reverse charge in cash
- a monthly match of self-invoices against GSTR-3B
Tax Garden's GST team handles:
- Vendor checks: GSTIN status for every scrap seller, tagged as reverse charge or GST TDS
- Self-invoices and vouchers: formats under Section 31(3)(f) and (g), ready for e-invoicing from January 2027
- GST TDS registration and GSTR-7: for contracts with registered aggregators above Rs 2.5 lakh
- GSTR-3B reporting: Table 3.1(d) liability, cash payment and Table 4(A)(3) ITC
- Notices: replies where reverse charge was paid from credit or the reverse charge and GST TDS split was missed
Looking for expert help with GST reverse charge on scrap: set up your RCM process? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Sources (official): Notification No. 04/2026-Central Tax (Rate) dated 27 October 2026, amending Notification No. 4/2017-Central Tax (Rate); Notification No. 06/2026-Central Tax dated 27 October 2026, amending Notification No. 5/2017-Central Tax; Notification No. 07/2026-Central Tax dated 27 October 2026, amending Notification No. 50/2018-Central Tax; Notification No. 04/2026-Central Tax dated 26 October 2026, amending Notification No. 13/2020-Central Tax; Notification No. 9/2025-Central Tax (Rate) (Schedule I S. Nos. 96 and 267, Schedule II S. Nos. 116, 130 and 521); Notification No. 06/2024-Central Tax (Rate) dated 8 October 2024 (metal scrap); Sections 2(82), 9(3), 10(1), 12(3), 16, 22, 24, 31(3), 49(4) and 51 of the CGST Act, 2017; Rule 47A of the CGST Rules, 2017. All read on taxinformation.cbic.gov.in. Check the current notification text on cbic.gov.in before applying it to a live transaction.
Frequently Asked Questions
Which goods come under GST reverse charge from 1 November 2026?
Used cooking oil (heading 1518), waste and scrap of plastics (3915), waste and scrap of tyres (4004) and electrical and electronics waste and scrap (8549), when a registered person buys them from an unregistered person. Notification 04/2026-Central Tax (Rate) added them to the reverse charge list. Metal scrap of Chapters 72 to 81 has been under reverse charge since 10 October 2024.
What is the GST rate payable under reverse charge on scrap?
The normal rate for the goods under Notification 9/2025-Central Tax (Rate): 18% on plastic scrap (3915) and e-waste (8549), 5% on used cooking oil (1518) and 5% on waste and scrap of rubber including tyre scrap (4004). Powders and granules made from rubber scrap are 18%.
Is reverse charge the same as GST TDS on scrap?
No, and the two never apply to the same purchase. Reverse charge applies when the seller is unregistered. GST TDS at 2% under Section 51 applies when a registered buyer buys these goods from a registered seller and the value of supply under the contract exceeds Rs 2.5 lakh (Notification 07/2026-Central Tax).
Can I pay reverse charge GST on scrap from my input tax credit?
No. Tax payable under reverse charge is not 'output tax' under Section 2(82) of the CGST Act, and Section 49(4) lets the credit ledger be used only for output tax. Pay it through the electronic cash ledger, then claim it back as ITC in the same GSTR-3B if the conditions are met.
Do I need a self-invoice for scrap bought from a kabadiwala?
Yes. Issue a self-invoice under Section 31(3)(f) within 30 days of receiving the goods (Rule 47A) and a payment voucher under Section 31(3)(g) when you pay the seller. The self-invoice is the document that supports your ITC claim.
Can scrap dealers still stay unregistered under GST?
Not on the strength of the old exemption. Notification 06/2026-Central Tax removes suppliers of these five categories from Notification 5/2017-Central Tax, which exempted persons making only reverse charge supplies from registration. They now register if their turnover crosses the Section 22 limit or a Section 24 trigger, such as inter-state supply, applies.
Does e-invoicing apply to self-invoices for scrap purchases?
From 1 January 2027, not now. Notification 04/2026-Central Tax extends e-invoicing to supplies received from unregistered persons under reverse charge, but only from 1 January 2027. Businesses already under e-invoicing should get their billing system ready to generate an IRN on self-invoices before then.
Does a composition dealer pay reverse charge on scrap?
Yes. The new entries cover any registered recipient, and Section 10(1) is subject to reverse charge under Section 9(3). A composition dealer pays the tax at the normal rate in cash and cannot claim ITC, so the tax becomes a cost.
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