On October 9, 2024, the Ministry of Finance issued Notification No. 25/2024-Central Tax, amending previous Notification No. 50/2018-Central Tax. This notification provides clarity on the Tax Deduction at Source (TDS) provisions under Section 51 of the CGST Act, 2017, and expands its scope to cover transactions involving the supply of metal scrap. The updated rule mandates that registered persons purchasing metal scrap classified under Chapters 72 to 81 of the Customs Tariff Act, 1975, must now deduct TDS at a rate of 2% if the taxable value exceeds ₹2,50,000.
This amendment is effective from October 10, 2024, and requires buyers and suppliers of metal scrap to comply with the updated TDS provisions under GST, including timely filing of GSTR-7 and obtaining TDS certificates (GSTR-7A).
Applicability of TDS to Metal Scrap: A new clause (d) has been added to include registered persons receiving metal scrap under Chapters 72 to 81 of the Customs Tariff Act, 1975. This broadens the TDS provision to cover various metal scraps such as iron, steel, copper, aluminum, and other base metals. The buyer must now deduct TDS under Section 51 of the CGST Act when purchasing these materials from registered suppliers.
Proviso Substitution: The third proviso of Notification No. 50/2018 has been replaced, confirming that supplies between certain entities remain exempt from TDS. However, this exemption no longer applies to transactions involving metal scrap between registered persons. This means that the metal scrap industry is now specifically included under TDS provisions.
Separate GST Registration for TDS Deduction: Buyers who are required to deduct TDS must obtain a separate GST registration using Form REG-07. This enables them to deduct GST TDS on applicable transactions.
Monthly TDS Credit for Suppliers: The supplier will receive credit for the deducted TDS in their cash ledger on a monthly basis. This TDS credit can be used to offset GST liabilities or claimed as a refund if there is excess credit.
Filing of GSTR-7: Buyers who deduct TDS must file Form GSTR-7 monthly, no later than the 10th of the following month, and pay the TDS liability.
GSTR-7A TDS Certificate: After filing GSTR-7, the buyer will automatically receive a GSTR-7A certificate, confirming the TDS deduction. This certificate serves as proof for the supplier that the TDS has been deducted and deposited.
Widening the Scope of TDS: By including metal scrap transactions under TDS provisions, the notification aims to improve tax compliance in this sector. Registered persons involved in purchasing metal scrap must now comply with the TDS provisions under GST, ensuring timely deduction, deposit, and filing.
Real-Time Credit for Suppliers: Unlike income tax, where TDS credit is available only after the assessment year, GST allows suppliers to receive TDS credit monthly, improving their cash flow.
No Exemption for Metal Scrap: The substitution of the third proviso makes it clear that metal scrap transactions are not exempt from TDS, even if the buyer and seller are both registered entities. This ensures that the metal scrap industry remains compliant with the TDS requirements under GST.
The introduction of TDS for metal scrap under Notification No. 25/2024-Central Tax brings a structured compliance framework for buyers and sellers in this industry. With the requirement of a 2% TDS deduction on transactions exceeding ₹2,50,000, both buyers and suppliers must ensure adherence to GST’s updated TDS provisions. This move aims to streamline tax deductions, promote liquidity for suppliers, and enhance overall compliance in the metal scrap sector.
Businesses dealing in metal scrap should ensure they register for TDS, file their returns on time, and properly manage the TDS credit to avoid any non-compliance issues.
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