Summary: Notification No. 07/2026–Central Tax, dated 27 October 2026, expands GST tax deduction at source (TDS) requirements from 1 November 2026 to purchases of five specified categories of goods between registered persons. These comprise used cooking oil, plastic waste and scrap, tyre waste and scrap, metal scrap, and electrical and electronic waste and scrap. The notification amends Notification No. 50/2018–Central Tax by substituting clause (d), which previously covered purchases of metal scrap alone. Under Section 51 of the CGST Act, the applicable TDS rate is 2% of the taxable supply value, excluding GST. Depending on the nature of the transaction, deduction comprises 1% CGST and 1% SGST or 2% IGST. The statutory requirement applies where the taxable value of supplies under a contract exceeds ₹2.5 lakh, subject to the prescribed place-of-supply restrictions. Deductors must obtain the appropriate registration, deposit deductions and file Form GSTR-7 within the prescribed timelines. The amendment operates alongside Notification No. 06/2026–Central Tax, which withdraws the special registration exemption for suppliers of the same five categories. Purchases from unregistered suppliers may instead attract reverse charge under the applicable rate notifications. Registered buyers should review purchase contracts, vendor GSTINs, TDS registration, accounting systems and return-filing procedures. Suppliers should monitor TDS credits in their electronic cash ledgers and reconcile them against buyer deductions. The changes seek to improve tax compliance and traceability in scrap and recycling transactions.
TDS on Purchase of Scrap, Used Cooking Oil and E Waste from 1 November 2026: Notification 07/2026 Central Tax
The change in short
From 1 November 2026, a registered person who buys used cooking oil, plastic scrap, tyre scrap, metal scrap or electronic waste from another registered person must deduct TDS at 2% under Section 51 of the CGST Act. Until now, this applied only to metal scrap.
The change is made by Notification No. 07/2026 Central Tax dated 27 October 2026, which amends Notification No. 50/2018 Central Tax dated 13 September 2018. It was recommended by the GST Council in its 57th meeting on 8 October 2026.
What is GST TDS, and how did scrap come into it
Section 51 of the CGST Act asks certain buyers to cut a small part of the payment due to the supplier and pay it straight to the government. This is GST TDS. The supplier gets credit for it in his electronic cash ledger and can use it to pay his own GST. It is not an extra tax. It is just a way of making sure the government gets the money even if the supplier is careless.
Originally GST TDS was meant only for Government departments, local authorities and certain public bodies. Notification No. 50/2018 lists the persons who must deduct.
In October 2024, after the 54th GST Council meeting, clause (d) was added to that list by Notification No. 25/2024 Central Tax. It required any registered person buying metal scrap from another registered person to deduct TDS. The concern was that the scrap trade was seeing a lot of fake invoices and tax that was charged but never paid.
What Notification 07/2026 adds
Notification 07/2026 substitutes clause (d). From 1 November 2026, any registered person receiving supply of any of the following goods from another registered person must deduct TDS:
| No. | Goods | Customs Tariff |
|---|---|---|
| 1 | Used cooking oil | Heading 1518 |
| 2 | Waste and scrap of plastics | Heading 3915 |
| 3 | Waste and scrap of tyres | Heading 4004 |
| 4 | Metal scrap | Chapters 72 to 81 |
| 5 | Electrical and electronic waste and scrap | Heading 8549 |
Items 1, 2, 3 and 5 are new. Metal scrap continues as before.
This notification works hand in hand with Notification 06/2026 Central Tax issued the same day. That one makes sure that suppliers of these five items take registration once they cross the threshold. This one makes sure that when such a registered supplier sells to a registered buyer, a small part of the payment is held back by the buyer and paid straight to the government. When the supplier is unregistered, TDS does not apply; instead the buyer pays the tax under reverse charge.
How the TDS works, with an example
The main rules under Section 51 are these:
1. Rate: 2% of the taxable value. Within the same State it is 1% CGST and 1% SGST. Between two States it is 2% IGST.
2. On what value: the value of the goods shown in the invoice, without the GST.
3. When it applies: only when the total value of supply under one contract is more than ₹2,50,000.
4. When to pay: the TDS cut in a month must be paid to the government by the 10th of the next month, with the return in Form GSTR 7.
Now an example. A registered dealer in Gudur sells plastic scrap to a registered recycling unit in Sri City under one purchase order. The value of the scrap is ₹5,00,000, and GST is charged on top at the applicable rate.
Both are in Andhra Pradesh, so the buyer deducts ₹5,000 as CGST TDS and ₹5,000 as SGST TDS, total ₹10,000. He pays the dealer the full invoice amount less ₹10,000. By the 10th of the next month he deposits ₹10,000 and files GSTR 7. The dealer accepts this amount on the portal, and it is credited to his electronic cash ledger. He can use it to pay his own GST.
So the dealer loses nothing. He only receives ₹10,000 through the government instead of directly from the buyer.
What buyers and sellers should do before 1 November
If you are the buyer:
1. Find out whether you buy any of these five items, even occasionally. Factories often sell their own scrap, but some also buy it as raw material.
2. If you are not already registered as a tax deductor for metal scrap, apply for TDS registration in Form GST REG 07. Your normal GSTIN does not cover this.
3. Tell your accounts team to hold back 2% on payments to registered suppliers of these items where the contract value crosses ₹2,50,000.
4. Deposit the TDS and file GSTR 7 by the 10th of every month. Delay brings interest and late fee.
If you are the seller:
1. Expect your payment to come 2% short from registered buyers.
2. Check the TDS credit on the portal every month and accept it, so that it reaches your cash ledger.
3. Use that credit to pay your GST, or claim a refund if it remains unused.
The idea is not to burden the honest trader. It is to make sure that the GST on scrap, which the buyer was claiming as input tax credit, is actually reaching the government. Read along with Notification 06/2026 on registration, it closes most of the gaps in the scrap trade.
