The recent Notification No. 25/2024-Central Tax, issued on October 9, 2024, clarifies TDS rules for metal scrap transactions, highlighting the government’s commitment to enhancing tax compliance in th
Summary of Notification:
On October 9, 2024, the Ministry of Finance released Notification No. 25/2024-Central Tax, amending Notification No. 50/2018-Central Tax. This update clarifies the Tax Deduction at Source (TDS) rules under Section 51 of the CGST Act, 2017, specifically for metal scrap transactions.
Key Changes:
Applicability: Registered buyers of metal scrap (Chapters 72-81) are included.
TDS Rate: 2% TDS on transactions over ₹2,50,000.
Registration: Buyers must obtain separate GST registration (Form REG-07) for TDS deduction.
TDS Credit: Suppliers receive monthly TDS credits in their cash ledger.
Exemption: No exemptions for metal scrap transactions from TDS.
Compliance: Starting October 10, 2024, updated TDS rules require filing GSTR-7 and issuing TDS certificates (GSTR-7A).
What is TDS under GST?
TDS under GST is a system where buyers deduct a percentage of payment for specified goods or services and remit it to the government, promoting tax compliance and simplifying revenue collection, as per Section 51 of the CGST Act and CGST Rule 66.
Effective Date
The amendments will be effective from October 10, 2024, for all eligible transactions.
Applicability of TDS
A 2% TDS is required on metal scrap purchases exceeding ₹2,50,000 per transaction.
Breakdown: CGST = 1%, SGST = 1% for intra-state, and IGST = 2% for inter-state transactions.
The ₹2,50,000 limit applies to each transaction individually.
Applicability of this Notification on Customs Tariff Act Chapters
The new TDS rule applies to metal scraps under several chapters, including:
Chapter 72: Iron and Steel
Chapter 73: Articles of Iron and Steel
Chapter 74: Copper
Chapter 75: Nickel
Chapter 76: Aluminium
Chapter 78: Lead
Chapter 79: Zinc
Chapter 80: Tin
Chapter 81: Other Base Metals and Cermets
Buyers must deduct TDS for transactions that meet the specified threshold.
Compliance requirements for TDS Deduction
To deduct GST TDS on metal scrap, buyers must:
Obtain Separate Registration: Register using Form REG-07 for TDS deduction.
Monthly Filing: Pay TDS and File Form GSTR-7 by the 10th of the following month.
Receive TDS Certificate: GSTR-7A certificate confirms TDS deduction and deposit.
Exemptions: No TDS applies to imported metal scrap.
Supplier Credit: Suppliers receive TDS credit reflected in their cash ledger monthly.
Supplier Benefits: TDS credit under GST can be used monthly to offset liabilities or claim refunds, enhancing cash flow management.
Conclusion:
Notification No. 25/2024-Central Tax outlines new TDS requirements for metal scrap transactions, effective October 10, 2024. Buyers must deduct 2% TDS on transactions exceeding ₹2,50,000 and acquire separate GST registration. This aims to enhance compliance, improve tax collection, and provide monthly TDS credits to suppliers, boosting their liquidity.
