HSN Code and GST Rate on Sale of Scrap Materials: A Guide for Businesses

Introduction to GST on Scrap Materials

Scrap material sales are subject to Goods and Services Tax (GST) in India, with rates varying based on the HSN (Harmonized System of Nomenclature) code assigned to each type of scrap. Understanding the correct HSN code and GST rate for scrap is crucial for compliance and accurate tax filing.

GST Rates on Different Types of Scrap

The GST rate for scrap materials depends on the nature of the scrap and its assigned HSN code. Here are some general guidelines:

1. Metal Scrap (Ferrous and Non-Ferrous) – HSN codes starting with 7204 for iron, 7404 for copper, and so on, typically attract 18% GST.
2. Plastic Scrap – HSN Code 3915, taxed at 5%.
3. Paper Waste and Scrap – HSN Code 4707, taxed at 5%.
4. Rubber and Tyre Scrap – HSN Code 4004, typically taxed at 18%.
5. E-Waste – HSN Code 8549, with a reduced rate of 5%.

Please consult the GST rate chart for any additional or specific materials not covered here.

Exclusion of TCS from GST Value

Under Section 206(C)(1) of the Income Tax Act, 1961, Tax Collected at Source (TCS) is required on the sale of certain goods, including scrap. However, it’s important to note:

The GST value on scrap should exclude TCS for the purpose of tax calculation.

TCS is applied on the sale value inclusive of GST, ensuring the final tax collected meets regulatory requirements.

Why Accurate HSN Code and GST Rate Matters

Using the correct HSN code and GST rate on invoices helps businesses avoid penalties, enables smooth tax compliance, and prevents audit issues. To keep updated on GST changes, check the official GST portal.

Conclusion

Determining the correct HSN code and GST rate for scrap materials is essential for compliant tax practices. This guide helps navigate GST on scrap materials, ensuring your business meets its tax obligations accurately.

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