Last reviewed: 12 November 2026. Since October 2024, metal scrap has had its own GST regime: the buyer pays tax under reverse charge when the seller is unregistered, the seller has to register, and a registered buyer deducts 2% TDS when the seller is registered. From 1 November 2026 the same three-part model has been extended to four more goods: used cooking oil, plastic waste, tyre waste and e-waste. If your business buys or sells any of these, vendor-wise treatment in your books changes from the first invoice of November. This note sets out what was notified, who does what, three worked examples and the points that are still open.
What the three notifications do
The package follows the 57th GST Council meeting of 8 October 2026. Each notification handles one leg of the model, and the legs fit together. Read them as a set, not one by one.
| Notification | Amends | Effect from 1 November 2026 |
|---|---|---|
| 04/2026-Central Tax (Rate) | Notification 4/2017-Central Tax (Rate), the reverse charge list for goods under section 9(3) | Used cooking oil, plastic waste and scrap, tyre waste and scrap, and e-waste and scrap supplied by an unregistered person to a registered person are taxed in the hands of the recipient |
| 06/2026-Central Tax | Notification 5/2017-Central Tax, the registration exemption | A supplier of these goods can no longer rely on the exemption available to persons whose supplies are all under reverse charge; registration is required once turnover crosses the threshold |
| 07/2026-Central Tax | Clause (d) of Notification 50/2018-Central Tax, TDS under section 51 | A registered person receiving any of the five categories (the four above and metal scrap) from another registered person deducts TDS; the rate of 2% and the ₹2.5 lakh limit come from section 51 |
Two further notifications of the same package matter to the same buyers. Notification 04/2026-Central Tax extends e-invoicing to inward supplies under reverse charge from 1 January 2027, and the CGST (Amendment) Rules, 2026 under Notification 05/2026-Central Tax change several registration and refund rules. We have left those to separate notes and will stay with scrap here.
How the rules fit together
The practical test is one question about the seller on the date of the supply: is the seller registered? The answer sends the purchase down one of two paths, and they do not overlap.
| Seller | Who pays GST to the government | What the registered buyer does |
|---|---|---|
| Unregistered (a collector, an aggregator below the threshold, a household) | The buyer, under reverse charge | Issues a self-invoice and a payment voucher, pays the tax in cash, then claims credit subject to section 16 |
| Registered | The seller charges GST in the invoice and pays it in the normal way | If the contract value is above ₹2.5 lakh excluding GST, deducts 2% from the payment, deposits it and files GSTR-7 |
The design closes a gap that the recycling trade has lived with for years: tax-free purchases of scrap from small collectors, followed by taxable sales further down the chain with credit claimed against nothing visible. Reverse charge makes the buyer pay at the first taxable step. Compulsory registration then pulls the collector who has grown into the net. TDS keeps the registered supplier's tax visible to the department through the buyer's return.
What a registered buyer needs to do
- Tag every vendor. Split your vendor master for these goods into registered and unregistered, and check the GSTIN status on the date of purchase, not only at the time of onboarding. A vendor who registers mid-year changes your treatment from that point.
- Purchases from unregistered sellers. Issue a self-invoice under section 31(3)(f) and a payment voucher under section 31(3)(g), pay the tax in the electronic cash ledger and report it in GSTR-3B as an inward supply liable to reverse charge. Credit becomes available only after the tax is paid, and the usual conditions of section 16 apply, including the time limit. Our note on the 30 November 2026 ITC deadline covers how that works.
- Purchases from registered sellers above ₹2.5 lakh. Deduct 2% (1% CGST and 1% SGST for an intra-State purchase, or 2% IGST for an inter-State one) from the payment, on the value excluding GST. Register as a tax deductor in Form GST REG-07 if you have not already done so for metal scrap, pay by the 10th of the next month and file GSTR-7.
- Book it differently. A TDS entry reduces cash paid to the vendor but not the vendor's invoice or your purchase cost. A reverse-charge entry adds a liability and a credit. Set separate tax codes in your accounting software before the first November bill is booked, so that the GSTR-3B and GSTR-7 workings come straight from the ledger.
What a seller needs to do
- Check your turnover against the registration threshold. If you have been selling used oil, plastic or e-waste only to registered buyers who paid the tax themselves, the exemption that kept you out of registration no longer applies to these goods. Our GST registration checklist lists what you need to file.
- After registration, charge GST in the invoice. Buyers above the contract limit will deduct 2% from your payment. The deducted amount reaches your electronic cash ledger after the buyer files GSTR-7, so match it against your cash-ledger statement every month.
- Do not break one contract into pieces. The limit applies to the value of supplies under a contract. Splitting a single arrangement into several small purchase orders to stay below ₹2.5 lakh invites a query from the buyer's side and, in a departmental review, an argument that the contract value was understated.
Worked example 1: a recycler buys from an unregistered collector
A plastic recycler registered in Maharashtra buys ₹1,50,000 of waste plastic from a local collector who has no GST registration. For the arithmetic, take an illustrative rate of 18%; the rate for your own HSN code should be taken from the rate schedule and not from this example.
| Step | Amount | Note |
|---|---|---|
| Purchase value paid to the collector | ₹1,50,000 | No GST is charged by the collector |
| GST payable by recipient (illustrative 18%) | ₹27,000 | ₹13,500 CGST and ₹13,500 SGST; paid in cash, with a self-invoice and payment voucher |
| Input tax credit after payment | ₹27,000 | Available subject to section 16; the cash outflow is temporary |
The cost to the recycler is a working-capital timing difference. The cash goes out in the month of the purchase and the credit is used against output tax in the same or later returns. The real risk is the one that follows from skipping the entry: tax not paid, credit not claimed and a mismatch that surfaces later with interest.
Worked example 2: a trader buys from a registered supplier
A trader registered in Maharashtra buys used cooking oil from a registered restaurant chain in Maharashtra under one contract of ₹12,00,000 excluding GST.
| Step | Amount | Note |
|---|---|---|
| Contract value excluding GST | ₹12,00,000 | Above the ₹2.5 lakh limit |
| TDS at 2% | ₹24,000 | ₹12,000 CGST and ₹12,000 SGST, deducted from the payment to the supplier |
| Deposit and return | ₹24,000 | Pay by the 10th of the next month and file GSTR-7 |
| Supplier's position | ₹24,000 | Appears in the supplier's electronic cash ledger after the trader files GSTR-7 |
The trader's own purchase cost and credit do not change, because the supplier's invoice carries the full GST. Only the cash paid to the supplier is lower by ₹24,000, and the supplier receives that amount as a credit in the cash ledger.
Worked example 3: where the ₹2.5 lakh line falls
| Contract value excluding GST | Seller registered? | Position |
|---|---|---|
| ₹2,40,000 | Yes | No TDS, because the value is not above ₹2.5 lakh |
| ₹2,60,000 | Yes | TDS of ₹5,200 (2% of ₹2,60,000) |
| ₹2,60,000 | No | Reverse charge on the whole purchase; the ₹2.5 lakh limit has no role |
Supplies that straddle 1 November
Section 14 of the CGST Act is the starting point for any supply where the date of supply, the invoice and the payment fall on different sides of the effective date. For the TDS leg, the deduction falls on the payment or credit to the supplier, so payments made on or after 1 November 2026 are the first ones to examine. If a bill for an October supply is paid in the second week of November, check how the law reads for that case before you decide not to deduct.
Open points to watch
- Transition. The notification texts we have read do not carry a separate transition clause for payments on earlier supplies. Until CBIC clarifies, document the view you take for each October supply paid in November.
- Threshold for the reverse charge. The entries do not appear to carry a monetary floor. Until a circular says otherwise, treat every purchase from an unregistered seller as covered.
- Household and institutional sellers. A household that sells a few litres of used oil is not carrying on a business, and an institution may fall under other exemptions. Document why an unregistered seller falls outside the reverse charge before you leave an entry unrecorded.
- Systems. GSTR-7 and GSTR-3B treatment of the new goods depends on the portal. Check the latest GSTN advisory before the first return of the new regime.
- Rule 86B. Cash paid on reverse charge increases the monthly cash outflow of a buyer. If the business is subject to the 1% cash payment condition, read it together with our note on Rule 86B when planning cash.
Checklist for the next three weeks
- List all vendors who supply used cooking oil, plastic waste, tyre waste or e-waste and mark each as registered or unregistered, with the GSTIN status verified on the portal.
- Apply for GST REG-07 if you are not a tax deductor yet and expect purchases above ₹2.5 lakh from registered suppliers.
- Create separate tax codes for reverse charge and TDS in the accounting software and test them with one dummy entry of each.
- Draft the self-invoice and payment-voucher formats and decide who in the team issues them, and how often.
- For sales: check turnover against the registration threshold and begin registration if it is close.
- Calendar the GSTR-7 due date, the 10th of every month, and the cash-ledger match for sellers.
- Keep one working file per month with the vendor-wise purchase value, tax paid on reverse charge, TDS deducted and the portal challans, so that a departmental query can be answered from one place.
Frequently asked questions
Which goods are newly covered from 1 November 2026?
Four categories join metal scrap (Chapters 72 to 81), which has been covered since October 2024: used cooking oil (heading 1518), waste and scrap of plastics (3915), waste and scrap of tyres (4004), and electrical and electronic waste and scrap (8549). Notification No. 04/2026-Central Tax (Rate) brings them under reverse charge, Notification No. 06/2026-Central Tax removes the registration exemption for their suppliers, and Notification No. 07/2026-Central Tax extends 2% GST TDS to them. All three are dated 27 October 2026 and take effect from 1 November 2026.
When do I pay GST under reverse charge and when do I deduct TDS?
The seller's registration status decides. If a registered buyer purchases any of these goods from an unregistered seller, the buyer pays the GST under section 9(3) on reverse charge. If the seller is registered, the seller charges GST as usual and the buyer deducts 2% TDS under section 51, provided the value of supplies under the contract exceeds ₹2.5 lakh excluding GST. The two never apply to the same purchase.
Is there a minimum limit for reverse charge on these goods?
The notification reads as a category-based reverse charge on supplies by an unregistered person to a registered person. We have not seen a monetary threshold in the entries, so a registered buyer should assume the reverse charge applies to every such purchase from an unregistered seller. The ₹2.5 lakh limit belongs to the TDS rule only.
How does a buyer get registered as a tax deductor?
A buyer who is not already registered as a tax deductor applies in Form GST REG-07. A normal GSTIN does not cover the deduction. As per the GSTN advisory of 1 November 2026, applicants in these categories select "Others" under Constitution of Business in Part B of Table 2 and state their category, for example used cooking oil dealer or e-waste dealer, in the text box that opens. The return is GSTR-7, due by the 10th of the following month.
Does an unregistered kabadiwala now have to register?
Notification No. 06/2026-Central Tax withdraws, for these goods, the exemption that protected a supplier whose supplies are all liable to reverse charge. Once aggregate turnover crosses the applicable threshold, the supplier has to take registration even if every buyer pays the tax. Below the threshold there is no registration requirement, and sales to registered buyers continue under reverse charge until then.
What if the supply, invoice and payment fall on different sides of 1 November?
Section 14 of the CGST Act decides the applicable law for a change at the date of supply, invoice and payment. The text we have read has no separate transition clause for the TDS extension, so a conservative approach is to deduct on payments made on or after 1 November 2026 where the seller is registered and the contract value is above the limit. Confirm the treatment for a live case against the notification and any circular issued later.
Will e-invoicing be affected?
Notification No. 04/2026-Central Tax extends e-invoicing from 1 January 2027 to inward supplies taxed under reverse charge from unregistered persons, and to import of services. A buyer who already has to issue e-invoices should plan to report these self-invoices on the portal from that date.
We can help map your vendors, set up the reverse-charge and TDS entries in your books and prepare the monthly GSTR-7 and GSTR-3B workings.
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This article is for general information and does not constitute advice on any specific case. Sources: Notification No. 04/2026-Central Tax (Rate), No. 06/2026-Central Tax and No. 07/2026-Central Tax, all dated 27 October 2026; Notification No. 50/2018-Central Tax; sections 9(3), 14, 16, 31 and 51 of the CGST Act, 2017; GSTN advisory of 1 November 2026. Rules, due dates and notifications change; confirm the current position on the CBIC tax repository and the GST portal before acting. Firm details: CA Somesh Chandak & Associates, Unit 119, 1st Floor, Centura Square IT Park, SG Barve Road, Wagle Estate, Thane West 400604. FRN 158694W.