Looking for expert help with GST and income tax for foundries and metal casting units India? 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.
Key Takeaways
- Iron and steel castings (7325), aluminium articles (7616) and copper or brass articles (7419) are 18% GST (Notification 9/2025-Central Tax (Rate), Schedule II). Foundry coke and natural sand are 5%.
- Metal scrap bought from an unregistered kabadiwala is taxed under reverse charge in your hands at 18% (Notification 06/2024-Central Tax (Rate), from 10 October 2024). The credit comes back to you.
- Scrap bought from a registered dealer in your state needs 2% GST TDS when the contract exceeds Rs 2,50,000, with a GSTR-7 return (Notification 25/2024-Central Tax).
- Scrap TCS is 2% from 1 April 2026 (Section 394, Income-tax Act 2025). Give your scrap suppliers a manufacturing declaration so they don't collect it.
- Audited foundries must file the AY 2026-27 return by 21 November 2026 (CBDT Circular 07/2026).
What is the GST rate on castings in India? Iron and steel castings under heading 7325 are taxed at 18% GST: 9% CGST plus 9% SGST, or 18% IGST on inter-State sales. The entry is Schedule II, S. No. 304 of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. Aluminium castings (7616) and brass or copper castings (7419) are also 18%.
A foundry's tax file is mostly about scrap. You melt it, you buy it from three kinds of sellers, and you generate it yourself as runners, risers and rejected castings. Each of those flows has its own GST and income tax rule, and most of them changed between October 2024 and April 2026. This guide covers the GST rates on what you buy and sell, the scrap rules, job work for customers who supply their own metal or patterns, and your income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 sections that apply from 1 April 2026.
What GST rate applies to castings and foundry inputs?
18% on almost everything you sell, and 5% or 18% on what you buy. The rates below are from Notification 9/2025-Central Tax (Rate), which replaced the old goods rate schedules from 22 September 2025. Schedule I carries 2.5% central tax (5% in all) and Schedule II carries 9% central tax (18% in all).
Comparison
GST Rates for a Foundry: Outputs and Inputs
| Item | HSN | GST | Notification 9/2025-CT(R) |
|---|---|---|---|
| Iron and steel castings (other cast articles) | 7325 | 18% | Schedule II, S. No. 304 |
| Other articles of iron or steel | 7326 | 18% | Schedule II, S. No. 305 |
| Copper and brass articles | 7419 | 18% | Schedule II, S. No. 321 |
| Aluminium articles | 7616 | 18% | Schedule II, S. No. 345 |
| Pig iron | 7201 | 18% | Schedule II, S. No. 260 |
| Ferro-alloys | 7202 | 18% | Schedule II, S. No. 261 |
| Ferrous waste and scrap; remelting scrap ingots | 7204 | 18% | Schedule II, S. No. 263 |
| Unwrought aluminium / aluminium scrap | 7601 / 7602 | 18% | Schedule II, S. Nos. 330, 331 |
| Coke and semi coke of coal | 2704 | 5% | Schedule I, S. No. 205 |
| Coal | 2701 | 18% | Schedule II, S. No. 23 |
| Natural sand | 2505 | 5% | Schedule I, S. No. 166 |
| Prepared binders for foundry moulds or cores | 3824 | 18% | Schedule II, S. No. 110 |
| Refractory goods (crucibles, nozzles, tubes) | 6903 | 18% | Schedule II, S. No. 234 |
| Ladles, ingot moulds and casting machines | 8454 | 18% | Schedule II, S. No. 440 |
| Moulding boxes and moulding patterns | 8480 | 18% | Schedule II, S. No. 465 |
Source: Notification 9/2025-Central Tax (Rate) dated 17 September 2025, in force from 22 September 2025
Example: a Coimbatore pump maker orders 2,000 kg of grey iron castings at Rs 110 a kg. The taxable value is Rs 2,20,000. You're both registered in Tamil Nadu, so you charge CGST at 9% (Rs 19,800) and SGST at 9% (Rs 19,800). The invoice total is Rs 2,59,600, and the buyer claims Rs 39,600 as credit.
Check what you are really selling. A rough casting is normally sold as a cast article. If you machine and supply a finished part, its classification may follow the machine it belongs to, and that can change the rate. For instance, parts of agricultural soil preparation machinery (8432 90) sit in Schedule I, S. No. 432 at 5%. Settle the HSN with your buyer before the first invoice, not after a notice.
Since inputs are mostly at 18% and coke at 5%, a foundry selling at 18% doesn't normally build up excess credit. Our GST input tax credit guide covers the general conditions for claiming it.
How is GST paid on scrap you buy?
It depends on who sells it to you. Get this wrong and you either lose credit or face a demand for tax you never paid.
Step-by-Step Guide
GST on Metal Scrap a Foundry Buys
1. Seller is unregistered (kabadiwala, small collector)
You pay 18% GST yourself under reverse charge (Notification 4/2017-CT(R), S. No. 8, inserted by Notification 06/2024-CT(R), from 10 October 2024). Issue a self-invoice, pay the tax in cash in GSTR-3B, then claim it as credit.
2. Seller is registered and in your state, contract above Rs 2,50,000
Seller charges GST on the invoice. You deduct 2% GST TDS (1% CGST plus 1% SGST) on the value before tax, deposit it within ten days after the month ends and file GSTR-7 (Notification 25/2024-CT; Section 51, CGST Act).
3. Seller is registered and in another state
Seller charges IGST. No GST TDS: Section 51 has no deduction where the supplier's location and place of supply are in a state different from your state of registration.
4. Seller is registered, contract value Rs 2,50,000 or less
Seller charges GST as normal. No GST TDS, because Section 51 applies only above Rs 2,50,000 under a contract.
Source: Notification 4/2017-Central Tax (Rate) S. No. 8 (inserted by 06/2024-CT(R)); Notification 50/2018-Central Tax clause (d) (inserted by 25/2024-CT); Section 51, CGST Act
Example (reverse charge): you buy 5,000 kg of MS scrap from an unregistered collector at Rs 32 a kg. Taxable value Rs 1,60,000. You pay Rs 28,800 of GST (18%) in cash and claim the same Rs 28,800 as credit in that return. The net cost is nil, but only if the cash payment is made first. Our reverse charge guide shows how to report it in GSTR-3B.
Example (GST TDS): a registered scrap dealer in your state supplies Rs 4,00,000 of scrap (before GST) under one contract. The invoice shows Rs 72,000 of GST, so Rs 4,72,000 in all. You deduct Rs 8,000 (Rs 4,000 CGST and Rs 4,000 SGST, at 1% each on Rs 4,00,000), pay the dealer Rs 4,64,000 and deposit Rs 8,000 with the government. Our GSTR-7 guide walks through the return.
From 1 November 2026, the same two rules were extended to some non-metal scrap such as plastic and tyre scrap. Our scrap dealers guide covers those items.
Does TCS apply to scrap a foundry buys or sells?
Yes, on both sides, and the rate doubled this year.
- FY 2025-26: 1% of the sale consideration on scrap (Section 206C(1), Income-tax Act 1961).
- From 1 April 2026: 2% (Section 394(1), Table Sl. No. 4, Income-tax Act 2025, as amended by the Finance Act 2026).
"Scrap" here means waste and scrap from manufacture or mechanical working of materials that is "definitely not usable as such" (Section 402(31), 2025 Act). Your runners, risers, rejected castings and borings fit that description.
When you buy scrap to melt. TCS is not collected from a resident buyer who gives the seller a written declaration that the goods will be used for manufacturing, processing or producing articles and not for trading (Section 206C(1A), 1961 Act; Section 394(2), 2025 Act). Give each regular supplier the declaration at the start of the year. Without it, a company or firm selling you scrap has to collect TCS, and your cash gets stuck until you claim it in your return.
When you sell your own scrap. If your foundry is a company, a firm, or a proprietor whose turnover crossed Rs 1 crore in the previous year, you are a "seller" for TCS (Section 402(33)(a), 2025 Act). Collect 2% on scrap sales unless the buyer gives you the manufacturing declaration. Send a copy of each declaration you receive to the income tax department by the seventh of the following month (Section 394(3)).
TDS on big purchases. If your turnover last year was above Rs 10 crore, you deduct 0.1% TDS on purchases from any one seller above Rs 50 lakh in the year (Section 194Q, 1961 Act; Section 393(1), Table Sl. No. 8(ii), 2025 Act). See our Section 194Q guide for how it interacts with TCS.
Job work: casting for customers who supply metal or patterns
Many foundries cast to order from a customer's own metal, or with the customer's patterns and core boxes.
Rate: 18%. Notification 15/2025-Central Tax (Rate) rewrote S. No. 26 of Notification 11/2017-Central Tax (Rate) from 22 September 2025. The 5% list in item (ii) covers food, textiles, leather, printing, bricks, jewellery, handicrafts and umbrellas. Metal goods aren't on it, so casting a customer's metal falls in item (iv) at 9% central tax, 18% in total.
Patterns and moulds come without time limits. Under Section 143(1) of the CGST Act, a registered principal can send inputs and capital goods to a job worker without paying tax. Inputs must come back within one year and capital goods within three years. Moulds and dies, jigs and fixtures, and tools are carved out of those limits, so a customer's pattern can sit in your shop for years without being treated as sold.
Scrap from job work. Under Section 143(5), if you are registered, you can sell the scrap generated during job work directly from your premises on payment of tax. If you aren't registered, the principal sells it. Agree in writing who keeps the scrap and at what value, so it doesn't turn into a hidden discount.
Our job work guide covers the challan and ITC-04 side.
Registration, composition and credit on furnaces
Registration. A supplier of goods only can stay unregistered up to Rs 40 lakh of aggregate turnover (Notification 10/2019-Central Tax). That higher limit doesn't apply to intra-State supplies in Telangana and a few other states, where the Rs 20 lakh limit of Section 22 applies. Most foundries sell to registered manufacturers who want credit, so they register from the start. Our GST registration service handles the application.
Composition rarely fits. Manufacturers can opt in with up to Rs 1.5 crore of turnover in the previous year (Notification 14/2019-Central Tax), paying up to 1% of turnover (Section 10(1)(a)). But you can't make inter-State sales (Section 10(2)(c)), and you can't collect tax or claim credit (Section 10(4)). Your buyers lose their credit too, and you'd still have reverse charge on scrap. See the composition scheme guide for the full conditions.
Credit on furnaces and the shed. Section 17(5)(d) of the CGST Act blocks credit on goods and services used to construct immovable property on your own account, unless it is "plant and machinery". That term covers apparatus, equipment and machinery fixed to earth by foundation or structural support, including the foundation, but excludes land, buildings and other civil structures.
- Cupola, induction furnace, sand plant, shot blasting machine and their foundations: credit allowed.
- Factory shed, boundary wall, office building: credit blocked.
Keep the contractor's bills split between machine foundations and civil work. A single lump-sum bill for "civil works" makes the furnace foundation credit hard to defend.
Income tax for foundry owners
Section 44AD for small units. A resident individual, HUF or partnership firm (not an LLP or company) can declare presumptive income if turnover is within Rs 2 crore, or Rs 3 crore if cash receipts stay within 5% (Section 44AD, 1961 Act, for FY 2025-26; Section 58(2), Table Sl. No. 1, 2025 Act, from 1 April 2026). Income is at least 6% of receipts by bank or digital mode and 8% of the rest.
Example (proprietor, new tax regime, FY 2025-26): turnover Rs 1.8 crore, all received by bank transfer. Presumptive income at 6% is Rs 10,80,000.
- Rs 0-4 lakh: nil.
- Rs 4-8 lakh at 5%: Rs 20,000.
- Rs 8-10.8 lakh at 10%: Rs 28,000.
- Tax before rebate: Rs 48,000. Income is within Rs 12 lakh, so the Section 87A rebate of up to Rs 60,000 covers it. Tax payable: nil.
Foundry margins swing with scrap and power prices. If your real profit is below 6% and your income is above the basic exemption limit, you need books and a tax audit to declare the lower figure. Our Section 44AD guide explains the lock-in rules.
Comparison
Income Tax Rules a Foundry Meets: Old and New Section Numbers
| Rule | Rate or limit | 1961 Act (FY 2025-26) | 2025 Act (from 1 Apr 2026) |
|---|---|---|---|
| TCS on scrap you sell | 1% (FY 2025-26); 2% (from 1 Apr 2026) | Section 206C(1) | Section 394(1), Table Sl. No. 4 |
| No TCS if buyer declares manufacturing use | Written declaration by resident buyer | Section 206C(1A) | Section 394(2) |
| TDS on purchase of goods | 0.1% above Rs 50 lakh per seller; buyer turnover above Rs 10 crore | Section 194Q | Section 393(1), Table Sl. No. 8(ii) |
| Presumptive income | 6% digital / 8% other; Rs 2 crore or Rs 3 crore | Section 44AD | Section 58 |
| Late payment to micro or small suppliers | Deduction only when paid | Section 43B(h) | Section 37(2)(g) |
Source: Income-tax Act 1961 ss. 43B(h), 44AD, 194Q, 206C(1), (1A); Income-tax Act 2025 ss. 37(2)(g), 58, 393(1), 394(1)-(3), 402(31), 402(33)
Paying MSME suppliers late costs you the deduction. If you owe money to a micro or small enterprise, such as a pattern shop, a fettling contractor or a scrap supplier registered under MSMED, and you pay beyond the time limit in Section 15 of the MSMED Act 2006, the expense is allowed only in the year you actually pay (Section 43B(h), 1961 Act; Section 37(2)(g), 2025 Act). Unlike taxes and PF, there's no relief for paying before the return due date (Section 37(3)). Our Section 43B(h) guide has the details.
Deadlines right now. If your FY 2025-26 accounts were audited, the return is due by 21 November 2026 (CBDT Circular 07/2026). File through our ITR filing service if you need help.
Common mistakes foundries make
- Skipping reverse charge on kabadiwala scrap. If the seller is unregistered, the 18% is yours to pay. The credit only comes after you've paid it in cash.
- Forgetting GSTR-7. A registered scrap dealer in your state with a contract above Rs 2,50,000 means GST TDS. Missing it leaves the dealer without credit and you with interest.
- Not sending scrap TCS declarations. Without a manufacturing declaration, a company supplier must collect 2% from 1 April 2026, and your working capital is tied up until the return.
- Charging 5% on job work. Metal casting isn't in the 5% job work list. It is 18%.
- Claiming credit on the shed. Furnace foundations qualify as plant and machinery. The building around them doesn't.
How Tax Garden helps foundries
We pay reverse charge on scrap from unregistered sellers every month, deduct and file GST TDS on registered scrap purchases, and file your GST returns on time. Our TDS filing service handles 194Q deductions and TCS returns on your scrap sales. Our accounting and bookkeeping service keeps melt-wise scrap, coke and power ledgers, so you can see your real margin per tonne. For related topics, see our guides to steel fabrication and welding workshops, GST on export of goods under LUT and Section 194Q vs 206C(1H).
