✅ INCOME TAX ACT (TCS by Seller)   - Click here for Video on this

·       TCS on Sale of Scrap – Under Section 206C(1) (effective from 01.04.2026) 

·       Seller must collect TCS @ 2% on every sale of scrap (metal scrap, iron, steel, copper, aluminium, etc.).  (1% TCS before 01.04.2026)

·       No threshold – Applies from the first rupee. 

·       Scrap definition: Waste/scrap from manufacturing or mechanical working that is not usable as it is.

·       Buyer can claim TCS credit in ITR. 

·       Exemption: No TCS if buyer gives Form 27C (declaration that scrap is for manufacturing/processing, not trading). 

Important: Buyer cannot deduct TDS u/s 194Q (0.1%) on scrap purchase – Section 206C overrides it. 

✅ GST ACT (Separate Provisions) 

1. TDS under GST (Buyer deducts) – Section 51 

·       Applies when both buyer & seller are GST registered. 

·       Metal scrap under Chapters 72 to 81 of Customs Tariff.

·       Buyer deducts TDS @ 2% (1% CGST + 1% SGST or 2% IGST) if supply value > ₹2.5 lakh. 

·       TDS is on taxable value (excluding GST). Supplier gets credit of this TDS. 

2. Reverse Charge Mechanism (RCM) 

·       Applies when seller is unregistered & buyer is registered.

·       Buyer pays full GST @ 18% under RCM on purchase of metal scrap (Chapters 72-81).

·       Buyer must issue self-invoice & pay tax + claim ITC (if eligible). 

Quick Tip for Business 

·       Seller (registered) → Charge GST @18% + collect IT TCS @2% 

·       Buyer (registered) → Deduct GST TDS @2% (from registered seller) OR pay RCM 18% (from unregistered seller)