One rule change can reshape your entire scrap business, and GST has done exactly that. Understanding GST on the sale of scrap is the difference between a smooth trade and a tax notice. Since the reverse charge rule came into effect in October 2024, the way the scrap GST rate is paid has changed, and every dealer needs to keep up.
MetalMandi is a digital-first scrap marketplace powered by Attero, built to bring transparency and fair pricing to a market that ran on guesswork for too long. Whether you're a kabadiwala (scrap seller), a small dealer, or a factory clearing tonnes of maal (scrap), you get live daily rates, price (bhaav) negotiation, and direct payment straight to your bank account. We work with 550+ vendors every day across 28 states and 500+ cities, including small sellers and those in the unorganised sector.
In this guide, we break down GST on metal scrap in plain language: the rate, the HSN codes, who pays under reverse charge, how input tax credit works, filing, and the penalties for getting it wrong. Whether you're a registered dealer, a small, unregistered seller, or a factory clearing surplus, you'll find clear answers here. We've checked every figure against official sources so you can trust it. By the end, you'll know your obligations and how to keep your maal (scrap) deals fully compliant.
Why GST Compliance Is Critical for Scrap Dealers in India?
GST compliance protects your business from penalties and builds buyer trust. The scrap sector has long been watched for tax leakage, which is why rules have tightened. Staying compliant keeps your cash flow clean and your reputation strong.
GST Rate on Scrap Metal Sales in India
The standard GST on the sale of scrap for most metals is 18%. This rate held steady even after the September 2025 rate rationalisation. Knowing it lets you price and invoice correctly every time.
HSN Code for Scrap Metal and Applicable GST Rates
Every scrap type has an HSN code that fixes its tax treatment. Getting the HSN code for scrap right keeps your invoices and returns matched.
- Iron and steel scrap: HSN 7204 - 18%
- Copper scrap: HSN 7404 - 18%
- Aluminium scrap: HSN 7602 - 18%
- Brass scrap: HSN 7402 - 18%
GST Rates for Key Scrap Categories: Iron, Copper, Aluminium, Brass
For the four big metals - iron, copper, aluminium, and brass - the GST on metal scrap is a flat 18%. There's no special lower slab for these, so whether you're trading iron offcuts or copper wire (copper rassa), the rate stays the same.
How GST Applies to Different Types of Scrap Sellers?
GST treats different sellers differently. Where you sit decides who pays the tax and how. Here's how GST on scrap metal works for each type.
Registered Scrap Dealers
If you're registered, you charge GST on scrap metal sales and deposit it. You also issue proper tax invoices with HSN codes. In return, you can claim input tax credit on eligible purchases.
Unregistered Scrap Sellers
Below the turnover threshold, you sell without charging GST. When your buyer is registered, they pay the tax under reverse charge. This keeps small sellers in the scrap business exempt from tax filing requirements until their turnover crosses the threshold.
Industrial Sellers and Manufacturers Selling Surplus Scrap
Factories selling production scrap are usually registered. They charge GST at 18%, issue invoices, and claim input tax credit. For them, scrap sales are simply another taxable supply in the scrap business.
Reverse Charge Mechanism (RCM) on Scrap Purchases
Reverse charge flipped the usual rule for scrap. Notification No. 06/2024 made it effective from 10 October 2024. Here's who pays and when.
Who Pays GST Under RCM in a Scrap Transaction?
Under RCM, the registered buyer pays GST to the government rather than the seller. The buyer self-assesses the 18% tax and can then claim it back as input credit. This shift was made to curb tax evasion in the sector.
When Does RCM Apply and When Does It Not?
RCM applies when a registered buyer purchases metal scrap from an unregistered seller. It does not apply when both parties are registered; in that case, normal GST rules continue, and a 2% TDS applies to B2B supplies by registered sellers.
GST Input Tax Credit (ITC) for Scrap Dealers
Input tax credit lets you offset the GST you've paid against the GST you owe. Used right, it protects your margin. Used incorrectly, it invites notice.
Can You Claim ITC on Scrap Purchases?
Yes, registered dealers can claim ITC on eligible scrap purchases, including GST paid under reverse charge. You need a valid invoice and the goods received. The credit then reduces your net tax payable.
Common ITC Mistakes Scrap Dealers Make
A few errors trip up dealers again. Avoid these:
• Claiming credit without a valid scrap invoice or proper documents.
• Mismatching HSN codes between your invoice and returns.
• Forgetting to record the reverse-charge tax correctly before claiming it.
GST Filing and Compliance for Scrap Businesses
Filing on time is the backbone of compliance. The GST on scrap sales you collect must be reported and deposited through regular returns. Here's what that looks like.
GSTR-1 and GSTR-3B for Scrap Dealers
GSTR-1 reports your outward sales; GSTR-3B is your monthly summary and tax payment. File both on time to stay compliant and keep your input credit flowing. Late filing brings interest and late fees.
E-Invoicing Requirements for Large Scrap Dealers
E-invoicing is mandatory once your turnover crosses the prescribed limit. Each scrap invoice then carries a unique reference number from the government portal. It makes large-scale GST rate reporting for scrap accurate and tamper-proof.
Penalties for GST Non-Compliance in Scrap Trading
Wrong filings, missed reverse-charge payments, or fake credit claims on GST on scrap sale can bring interest, heavy penalties, and notices. In serious cases, registration can be cancelled. The simple fix is to register on time, invoice correctly, and file every return.
How MetalMandi Supports GST-Compliant Scrap Transactions?
We make GST the easy part of your deal. On MetalMandi, the digital-first marketplace powered by Attero, every transaction is recorded, transparent, and ready for your returns.
- Proper invoicing with correct HSN codes and the right scrap GST rate.
- Digital records of weight, rate, and payment for clean filing.
- Verified buyers and direct bank payment.
- Support for 550+ vendors, with price (bhaav) negotiation and no middlemen.
FAQs
What is the GST rate on scrap metal sales in India?
Most metal scrap attracts 18% GST. This applies to iron, copper, aluminium, and brass scrap.
What is the HSN code for iron scrap and aluminium scrap?
Iron and steel scrap fall under HSN 7204, and aluminium scrap under HSN 7602, both taxed at 18%.
Does GST apply when selling scrap to an unregistered buyer?
If you're a registered seller, you charge GST as usual. The reverse charge rule applies only when a registered buyer purchases from an unregistered seller.
What is the reverse charge mechanism in scrap trading?
Under RCM, effective 10 October 2024, a registered buyer pays GST on scrap purchased from an unregistered seller, rather than the seller collecting it.
Can scrap dealers claim input tax credit on purchases?
Yes. Registered dealers can claim ITC on eligible purchases, including tax paid under reverse charge, provided they have valid invoices.
Is e-invoicing mandatory for scrap dealers in India?
It becomes mandatory once turnover crosses the prescribed limit. Each invoice then carries a unique reference number from the government portal.
What happens if a scrap dealer does not register for GST?
Trading above the threshold without registration can bring penalties, interest, and notices. Registering on time keeps your business safe.
How does MetalMandi ensure GST-compliant transactions?
We provide proper invoices with correct HSN codes, digital records, and direct bank payments, keeping every deal documented and compliant.