Detailed Clarification on Notification No. 25/2024-Central Tax– Applicability of Deduction TDS On Registered Persons Involved In The Supply Of Metal Scrap.
Summary: The Ministry of Finance issued Notification No. 25/2024-Central Tax on October 9, 2024, amending the earlier Notification No. 50/2018-Central Tax to clarify the Tax Deduction at Source (TDS) provisions under Section 51 of the CGST Act, 2017. This amendment broadens the scope of TDS by including registered persons receiving metal scrap, classified under Chapters 72 to 81 of the Customs Tariff Act, 1975, in its ambit. The changes specify that TDS at a rate of 2% must be deducted for transactions where the taxable value exceeds ₹2,50,000. The buyer must obtain a separate GST registration (Form REG-07) to deduct TDS, and the supplier will receive the TDS credit in their cash ledger monthly. The notification also replaces the third proviso, confirming that while supplies between certain entities remain exempt from TDS, transactions involving metal scrap are not exempt. This amendment, effective from October 10, 2024, requires both buyers and sellers to ensure compliance with the updated GST TDS provisions, including timely filing of GSTR-7 and obtaining TDS certificates (GSTR-7A). The changes aim to streamline tax deduction, ensuring that the metal scrap industry adheres to GST’s TDS requirements while improving liquidity for suppliers.
Introduction:
On 9th October 2024, the Ministry of Finance, Department of Revenue, issued Notification No. 25/2024-Central Tax (G.S.R. 629(E)), further amending the previously issued Notification No. 50/2018-Central Tax dated 13th September 2018. This notification pertains to the provisions regarding Tax Deduction at Source (TDS) under the Central Goods and Services Tax (CGST) Act, 2017. The recent amendment introduces changes regarding the applicability of TDS provisions on registered persons involved in the supply of metal scrap.
Key Provisions of the Notification:
The notification is issued under the powers conferred by Section 51 of the CGST Act, 2017, which deals with the mechanism of Tax Deduction at Source (TDS), and sub-section (3) of section 1 of the CGST Act, 2017, which empowers the Central Government to appoint the date for the applicability of certain provisions.
This notification brings two significant changes to notification no. 50/2018- Central Tax:
Page Contents
- 1. Amendment to Clause (c):
- 2. Substitution of the Third Proviso:
- Effective Date:
- Impact of the Notification:
- Key Highlights of the Notification:
- TDS on Metal Scrap Purchases
- Chapters of the Customs Tariff Act to Which This Rule Applies:
- Separate GST Registration for TDS Deduction:
- Credit of TDS for the Supplier:
- Monthly Filing of GSTR-7:
- GSTR-7A: TDS Certificate
- Exemptions and Exclusions:
- Comparison with Income Tax:
- Conclusion:
1. Amendment to Clause (c):
A new clause (d) has been added after clause (c) and before the first proviso. This clause extends the scope of TDS to include:
“(d) any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), from other registered persons”
Key Points:
- This clause makes TDS applicable to registered persons involved in receiving supplies of metal scrap.
- The metal scrap refers to products falling under Chapters 72 to 81 of the First Schedule to the Customs Tariff Act, 1975. These chapters cover various metals and their scraps, such as iron, steel, copper, nickel, aluminum, lead, zinc, tin, and other base metals.
- The amendment ensures that registered persons involved in the purchase of metal scrap from other registered persons will now be liable to deduct TDS under Section 51 of the CGST Act, 2017.
2. Substitution of the Third Proviso:
The third proviso of the notification has been substituted with the following:
“Provided also that nothing in this notification shall apply to the supply of goods or services or both, which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of
sub-section (1) of Section 51 of the said Act, except the person referred to in clause (d) of this notification.”
Explanation of the Change:
- This substitution clarifies that the TDS provisions under Section 51 of the CGST Act shall not apply to the supply of goods or services between certain categories of persons specified in clauses (a), (b), (c), and (d) of sub-section (1) of Section 51, except for those specified in clause (d).
- This means that while supplies between specified persons (such as government departments, local authorities, etc.) remain exempt from TDS, this exemption does not apply to registered persons receiving metal scrap (as specified in the new clause (d)).
- Therefore, metal scrap transactions between registered persons are now specifically included under the TDS provisions, while other exempt categories of transactions remain unaffected.
Effective Date:
The notification clearly states that the amendments will come into effect from the 10th of October 2024. This means that the provisions of this notification must be complied with for all eligible transactions on or after this date.
Impact of the Notification:
- Widening the Scope of TDS:
By introducing metal scrap under Chapters 72 to 81 of the Customs Tariff Act, 1975, this notification broadens the scope of TDS under GST. Registered persons dealing in the supply and purchase of metal scrap will now need to adhere to the TDS provisions outlined in Section 51.
- Compliance for Registered Dealers:
Registered dealers in the metal scrap industry must now ensure compliance with TDS provisions on their purchases. They will be required to deduct TDS when receiving supplies from other registered persons, and they should make necessary arrangements in their accounting and reporting systems to accommodate this change.
- No Exemption for Metal Scrap Supplies:
The proviso substitution clarifies that while certain supplies remain exempt from TDS between specified persons, supplies involving metal scrap are not eligible for such exemption. This ensures that the metal scrap industry is brought under the purview of TDS compliance.
- Administrative Procedures:
Registered persons who fall under the purview of this amendment will need to ensure timely and accurate deduction and deposit of TDS. Additionally, they will need to file TDS returns as per the existing provisions of the CGST Act.
Key Highlights of the Notification:
- Applicability of TDS:
- From 10th October 2024, a TDS of 2% is required to be deducted by the recipient (buyer) of goods, under GST, when purchasing metal scrap.
- Condition: The taxable value of the supply must exceed ₹2,50,000 per transaction.
- TDS Rate Breakdown:
- CGST = 1%
- SGST = 1% (for intra-state transactions)
- IGST = 2% (for inter-state transactions)
TDS on Metal Scrap Purchases
The new TDS rule specifically applies to the purchase of metal scrap. The TDS rate of 2% will be calculated on the taxable value of the metal scrap being purchased, not on the total invoice value (which includes GST).
Important Note:
- TDS under this rule is only applicable to transactions where the taxable value exceeds ₹2,50,000 per transaction.
Chapters of the Customs Tariff Act to Which This Rule Applies:
The new TDS rule is applicable to metal scraps falling under Chapters 72 to 81 of the First Schedule to the Customs Tariff Act, 1975. These chapters include the following materials:
- Chapter 72 – Iron and Steel
- Chapter 73 – Articles of Iron and Steel
- Chapter 74 – Copper and Articles thereof
- Chapter 75 – Nickel and Articles thereof
- Chapter 76 – Aluminum and Articles thereof
- Chapter 78 – Lead and Articles thereof
- Chapter 79 – Zinc and Articles thereof
- Chapter 80 – Tin and Articles thereof
- Chapter 81 – Other Base Metals; Cermets; Articles thereof
This means that buyers purchasing any metal scrap categorized under these chapters must deduct GST TDS on qualifying transactions.
Separate GST Registration for TDS Deduction:
To deduct GST TDS, the buyer of the metal scrap must obtain a separate GST registration for TDS deduction. The form for this registration is Form REG-07.
Documents Required for Registration: While the notification does not specify the exact documents required for this registration, generally, the following may be required:
- PAN card of the entity.
- Proof of Business Address (such as utility bills, property tax receipts).
- Bank Account Details.
- Authorization Letter in case of a company/LLP.
Once registered under Form REG-07, the buyer can begin deducting GST TDS on qualifying transactions.
Credit of TDS for the Supplier:
The supplier or seller of the metal scrap will receive the credit of the TDS deducted by the buyer. This credit will be automatically reflected in the cash ledger of the supplier on a monthly basis.
Benefits for the Supplier:
- Unlike Income Tax, where TDS credit is available only after the end of the assessment year, under GST, the credit of the TDS is available monthly.
- The supplier can utilize this credit to:
- Offset their GST liability.
- Claim a refund in case of excess credit.
This mechanism provides flexibility to the supplier to manage their cash flow effectively under GST.
Monthly Filing of GSTR-7:
The buyer (who has deducted the TDS) is required to file Form GSTR-7 monthly, no later than the 10th of the subsequent month.
Filing Process:
- The buyer needs to report the TDS deducted in GSTR-7.
- Payment of TDS liability must be discharged along with this filing.
GSTR-7A: TDS Certificate
After the GSTR-7 has been filed, the GSTR-7A certificate will be automatically generated. This certificate acts similarly to Form 16A under the Income Tax Act, and serves as a confirmation to the supplier that TDS has been deducted and deposited.
Exemptions and Exclusions:
- TDS on metal scrap under GST is not applicable to the import of metal scrap. This means if the recipient (buyer) is importing metal scrap from a foreign country, no TDS deduction is required under GST.
Comparison with Income Tax:
The GST TDS system differs from the Income Tax TDS system in the following ways:
- Faster Credit Availability: Under GST, the credit of TDS deducted by the buyer is immediately available on a monthly basis through the cash ledger of the supplier. This is different from Income Tax, where the TDS credit is available only after the assessment year ends.
- Real-Time Cash Flow Management: Suppliers can either utilize this TDS credit to pay off GST liabilities or claim refunds if there is excess credit.
The introduction of TDS under GST for metal scrap transactions (above ₹2,50,000) brings a structured compliance requirement for buyers and sellers. By implementing Form REG-07 for TDS registration, filing GSTR-7, and receiving GSTR-7A certificates, both buyers and suppliers can manage their tax liabilities and credits more efficiently.
This notification aims to streamline tax deductions and ensure real-time credit availability for suppliers, while simultaneously simplifying the compliance procedures for TDS under GST.
With the provision of TDS credit monthly, the GST TDS mechanism ensures liquidity for the seller while promoting compliance among buyers dealing in metal scrap.
Conclusion:
The Notification No. 25/2024-Central Tax introduces a significant change by including metal scrap supplies under the purview of TDS provisions in GST. This amendment, effective from 10th October 2024, will require registered persons dealing in metal scrap to comply with the TDS provisions under Section 51 of the CGST Act. Businesses and dealers in this sector must ensure adherence to these provisions to avoid penalties and non-compliance issues.
The amendment is a step towards expanding the GST compliance net and ensuring proper tax deduction and reporting for a wider range of transactions, particularly in the metal scrap industry.
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Author Bio
Is sponge Iron Fall under this TDS on metal scrap vide Notification 25/2024 C.E.
In the case where the supplier is a PSU (GST TDS is not applicable), will GST TDS still be deducted by scrap buyer?
Does every registered dealer purchasing scrap though not liable to deduct tds have to mandatorily get tds registration?
Clarification on TDS Applicability on Metal Scrap under GST
As per Notification No. 25/2024-Central Tax, when a registered buyer purchases metal scrap from a registered seller, TDS at 2% is required to be deducted by the buyer if the value of the supply exceeds Rs 2.5 lakhs in aggregate, either in a single transaction or cumulatively over multiple invoices within a day, month, or year.
Clarification on GST TDS Registration Applicability for Purchase of Metal Scrap from Registered Dealers
In accordance with Notification No. 25/2024-Central Tax, TDS under GST on the purchase of metal scrap is applicable only when a registered dealer purchases scrap from another registered dealer and the aggregate value of supplies in a day, month, or year exceeds Rs. 2.5 lakhs.
If a dealer is not purchasing metal scrap from a registered dealer or the total purchase value from a registered dealer does not exceed Rs. 2.5 lakhs, there is no requirement to obtain GST TDS registration. TDS registration is only mandatory when both the conditions of purchasing from a registered dealer and exceeding the threshold value are met.
QUERY FROM GUJARATH
1. Question: Applicability of TDS under GST on Metal Scrap
If a registered buyer receives metal scrap worth Rs 1,50,000 through one sales invoice, and on the same day, receives another Rs 50,000 worth of metal scrap from the same registered seller through a second sales invoice, bringing the total value of purchases for the day to Rs 2,00,000, is the buyer required to deduct TDS at 2% under GST as per the provisions of Notification No. 25/2024-Central Tax?
Clarification on TDS Applicability under GST on Metal Scrap as per Notification No. 25/2024-Central Tax
As per Notification No. 25/2024-Central Tax, TDS under GST is applicable on the supply of metal scrap when the value of supply exceeds INR 2.5 lakhs. The value threshold of INR 2.5 lakhs is considered based on the aggregate value of all supplies received from a single supplier in a day.
In the scenario where a registered buyer receives metal scrap worth INR 1,50,000 through one sales invoice and an additional INR 50,000 through another sales invoice from the same registered supplier on the same day, the aggregate value of supplies from the seller for that day amounts to INR 2,00,000. Since this total value does not exceed the threshold of INR 2.5 lakhs, TDS at 2% is not required to be deducted by the buyer.
However, if the total value of supplies from the same supplier on a single day exceeds INR 2.5 lakhs, TDS would be applicable at 2% on the entire value of the supply for that day.
In this case, since the total value for the day is INR 2,00,000, which is below the threshold, no TDS deduction is required.
2. Question: Applicability of TDS on Metal Scrap under GST
If a registered buyer receives metal scrap worth Rs 1,50,000 through one sales invoice, and on the same day, receives another Rs 1,50,000 worth of metal scrap from the same registered seller through a second sales invoice, bringing the total value of purchases for the day to Rs 3,00,000, does the buyer need to deduct TDS at 2% from the seller under GST, as per the provisions of Notification No. 25/2024-Central Tax?
Clarification on TDS Applicability under GST on Metal Scrap as per Notification No. 25/2024-Central Tax
As per Notification No. 25/2024-Central Tax, TDS under GST is applicable when the aggregate value of supply of metal scrap exceeds INR 2.5 lakhs from a single registered supplier. The value threshold of INR 2.5 lakhs is considered based on the total value of all supplies received from the supplier in a single day.
In the given scenario, if a registered buyer receives metal scrap worth INR 1,50,000 through one sales invoice and another INR 1,50,000 through a second sales invoice from the same registered seller on the same day, the aggregate value of supplies for the day would be INR 3,00,000. Since this total value exceeds the threshold of INR 2.5 lakhs, the buyer is required to deduct TDS at 2% on the total amount of INR 3,00,000.
Therefore, the buyer should deduct TDS at 2% from the seller, as the total value of supplies from the seller on that day exceeds INR 2.5 lakhs.
Query From Visakhapatnam
Is TDS under GST on metal scrap is applicable on supplies from govt entities to registered trader?
Supplier : Govt sector
Receiver: Trader
Om Sairam Enterprises Visakhapatnam Metal scrap purchased through E-auction.
Clarification on TDS Applicability for Metal Scrap Purchases from Government Entities
As per Notification No. 25/2024-Central Tax, which came into effect on 10th October 2024, metal scrap supplies have been brought under the purview of Tax Deducted at Source (TDS) provisions in GST. This notification amends the principal notification no. 50/2018-Central Tax by including supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule of the Customs Tariff Act, 1975.
The key change is that any registered person receiving supplies of metal scrap from another registered person is now required to deduct TDS under Section 51 of the CGST Act.
However, as per the amended notification, TDS provisions do not apply to transactions between persons specified under clauses (a), (b), (c), and (d) of sub-section (1) of Section 51 of the CGST Act. This includes government entities, local authorities, public sector undertakings, and other notified persons.
Clarification: If a dealer purchases metal scrap from a government department or entity specified under Section 51 of the CGST Act, TDS is not required to be deducted on such transactions. The government department is exempt from the TDS compliance burden for such supplies. Dealers must, however, verify the status of their suppliers to ensure that they fall under this exemption category.
By Dr Muhammed Musthafa C T (BRQ)
NOTIFICATION
New Delhi, the 9th October, 2024.
No. 25/2024-Central Tax
G.S.R. 629(E).— In exercise of the powers conferred by sub-section (3) of section 1 read with section 51 of the Central Goods and Services Tax Act, 2017 (12 of 2017), hereafter in this notification referred to as the said Act, the Central Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 50/2018-Central Tax, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R 868 (E), dated 13th September, 2018, namely:–
In the said notification,
(i) after clause (c) and before the first proviso, the following clause shall be inserted,-
“(d) any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), from other registered person”;
(ii) for the third proviso, the following proviso shall be substituted, namely-
“Provided also that nothing in this notification shall apply to the supply of goods or services or both,
which takes place between one person to another person specified under clauses (a), (b), (c) and (d)
of sub-section (1) of Section 51 of the said Act, except the person referred to in clause (d) of this
notification.”
2. This notification shall come into force with effect from the 10th day of October, 2024.
[F No. CBIC-190354/149/2024-TO(TRU-II)]
AMREETA TITUS, Dy. Secy.
Note:- The principal notification no. 50/2018- Central Tax, was published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R 868 (E), dated 13th September, 2018 and last amended vide notification no. 73/2018-Central Tax, number G.S.R 1250(E), dated 31st December, 2018.
clauses (a), (b), (c) and (d) of sub-section (1) of Section 51 of the CGST Act, 2017
Section 51 of the CGST Act, 2017, (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) Governmental agencies; or (d) (a) an authority or a board or any other body, -(i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with fifty-one per cent. or more participation by way of equity or control, to carry out any function; (b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); (c ) public sector undertakings is liable for Registration as Tax Deductor under GST Act.
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