The GST Council has made two major changes regarding scrap metal in its 54th meeting held on 9 September. First, bringing RCM in the supply of scrap metal and second, imposing 2% TDS on the supply of scrap metal.
MRAI Association organized a webinar on 12 September to make entrepreneurs aware of these two points. Association President Sh. Sanjay Mehta (Director, MTC Group), Sh. Jinesh Shah (Director, MRAI and Rajhans Impex Pvt. Ltd.), Sh. Naveen Sharma (Director, MRAI and Gravita India Ltd.) and Sh. Vikash Banka (Tax Consultant, GST) were the speakers in the webinar. In the webinar, tax consultant Sh. Vikash Banka shared information on this subject and also answered questions. Address by Shri Vikas Banka-
The biggest problem facing entrepreneurs right now is that when they receive goods from L1, L2 vendors through L3, L4, L5 vendors with fake invoices, entrepreneurs are unable to find out that the goods coming to them through L1, L2 vendors started with fake invoices. Later, after 1.5 to 2 years, when a government department raids, the entrepreneur also comes to know for the first time that some invoices are fake. In such a situation, despite the entrepreneur not being at fault, government departments issue notices of 1.5 to 3 crores and we have to pay the tax. The metal industry has been fighting with the government for a long time regarding this problem so that innocent recycling entrepreneurs who are recycling in the right way can be saved.
Now the government has introduced 2% TDS. This 2% TDS is GST TDS. It is governed by section 51. This TDS is already being deducted in government departments. Those who are dealing with government departments know this. The new thing in this is that it will now be applicable on metal scrap as well. Non-metal scrap is not covered in this yet. This TDS will be applicable only in B2B. It does not apply in B2C because in B2C the customer does not have a GST number.
A new thing that is associated with this TDS is RCM (Reverse Charge Mechanism). In RCM, when a registered party buys from an un-registered party, the registered party will have to pay 18 percent GST. Till now, before October 13, if you bought anything from an un-registered party, you would get a rebate on purchases up to Rs. 5,000. Whatever expenses were incurred above that, the entire RCM had to be paid by the registered party.
Objective
Its objective is only to eliminate fake invoices. Due to this TDS, a complete chain of goods will be created. In this, 2% of TDS will come in the cash ledger, you can either adjust it with your output tax liability or use it in RCM payment or you can also take its refund. This can be done by filling GST 7.
How will it work
When the first purchase is made, it has two forms, first purchase from an un-registered party and second purchase from a registered party. When you purchase from an un-registered party, you will have to pay the full 18% and you can adjust that 18% with the output tax while selling. If you are purchasing from a registered party, then in that case you will get a bill of Rs. 118 for goods worth Rs. 100, out of which Rs. 116 will have to be RTGS and Rs. 2 will go to their credit ledger through TDS return. In other words, Rs. 2 has to be put in the cash account of GST. This purchase will remain the same in all B2B transactions.
Now there is a question, will the 2% deducted automatically come in the suppliers ledger? The answer is no. For this there is GSTR 7A. There is an option in it which says TDS/TCS received. If you click on it, the list of those who have deducted and deposited your TDS will appear in front of you. Here when you accept it, that money will go to your cash credit ledger. The 10th date has been kept for filing TDS return.
Some Questions and Answers
Question 1. Are Scrap Batteries, electronic waste, lithium batteries also part of metal scrap?
Answer: It is not clear yet. (At the time of publishing this news, notifications has came, and Scrap Batteries are not included in this).
Question 2. When to deposit 2% of TDS?
Answer: This has to be done as soon as the invoice is created. You can make the remaining payment later. For example, suppose the payment term is 90 days, in this situation you will have to pay 2% TDS to the government first.
Question 3. Who will generate the e-way bill on purchase from an un-registered person?
Answer: Anyone can generate the e-way bill, so if you are buying any goods, go to the portal and generate the e-way bill yourself. It will be done by the one who is carrying the goods. Even an ordinary citizen can create an e-way bill.
Question 4. What is the threshold limit of an un-registered supplier?
Answer: An un-registered supplier can supply goods worth a maximum of Rs. 40 lakh. If you know that you have received goods worth more than Rs. 40 lakh from such a supplier, then you should immediately separate from him because he is not following the law. This threshold is different state-wise. In some states it is Rs. 40 lakh and in some states it is Rs. 20 lakh.
Question 5. How will this support the entrepreneur?
Answer: Due to the collection of 2% TDS, the government is getting 2% of every transaction. So if you receive a fake billing and you have paid, then you have already paid 2% of it to the government. Because of this, the 2% TDS deposited by you will protect you in the court. Under this, you did whatever you could. As of today, a notification is issued to you at the rate of 18% GST, 300% penalty and 29% interest on 100% fake billing amount.
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ANNUAL BATTERY DIRECTORY-2025
Vol.40, No.1
Pages: 1616
Published on 07.01.2025
