New GST for Scrap Material and Waste Products

What Is Scrap Under GST?

Scrap refers to waste or discarded material generated during the manufacturing or production process, or after the useful life of a product.

The gst on scrap depends on the type of scrap material and its applicable HSN classification. The gst on scrap sale depends on the nature of scrap supplied, applicable HSN classification, and GST rate applicable to that category.

• Iron and steel scrap
• Aluminium scrap
• Plastic or rubber scrap
• Paper and cardboard scrap
• Electronic waste

These materials are bought and sold in large volumes and attract specific GST rates based on their type.

New GST Rate on Scrap Materials

The Government of India has rationalised GST rates on several scrap categories as part of the GST updates effective after 22 September 2025. Scrap materials continue to be taxed based on their scrap hsn code and applicable HSN classification.

One notable revision is for paper waste and scrap, where the GST rate has been reduced from 12% to 5%. Certain categories like e-waste continue to attract 5% GST, subject to specific regulatory conditions.

The applicable scrap hsn code determines the GST rate for different scrap materials, including metal, paper, plastic, rubber, and electronic waste. 

Note: E-waste covered by the specified entry under headings 84 or 85 attracts 18% GST under the current GST rate schedule. Classification should be verified based on whether the goods qualify as e-waste under the applicable GST entry. 

GST Rules for Scrap Sales in India

Scrap generated during manufacturing, trading, or recycling activities is taxable under GST. In most cases, scrap materials such as metal, plastic, and rubber scrap attract 18% GST. The applicable rate depends on the HSN classification of the scrap material, so businesses must ensure the correct HSN code is mentioned while issuing invoices.

GST applies when scrap is sold as part of manufacturing waste, when it is supplied by registered traders or recyclers, or when businesses dispose of scrap inventory during regular operations or liquidation. Proper classification and invoicing are important to remain compliant with GST regulations.

Iron Scrap GST Rate

Iron and steel scrap are among the most commonly traded scrap materials in India. These fall under HSN Code 7204, and the applicable GST rate is 18%.

This rate typically applies to scrap generated from demolished structures, discarded machinery parts, manufacturing waste, damaged metal components, or old vehicle bodies. Businesses dealing in iron scrap must charge GST at the applicable rate when selling such materials.

GST Compliance for Scrap Sellers

Any GST-registered business selling scrap materials must follow standard GST compliance requirements. This includes issuing a tax invoice mentioning the correct HSN code, charging GST on the sale, and reporting the transaction in GST returns such as GSTR-1 and GSTR-3B.

The collected GST must then be deposited with the government within the prescribed timelines. This rule applies not only to manufacturers and traders but also to job workers or contractors who generate scrap during production or processing activities.

Input Tax Credit on Scrap Purchases

Businesses that purchase scrap materials for further processing or recycling can claim Input Tax Credit (ITC) on the GST paid during the purchase. This helps reduce the overall tax burden in B2B transactions.

To claim ITC on scrap purchases, the buyer must be registered under GST, the scrap must be purchased for business purposes, and the supplier must provide a valid tax invoice with the correct HSN classification.

Because of this mechanism, GST on scrap often functions as a pass-through tax in business-to-business transactions, where the tax paid at purchase can be offset against the tax payable on future sales.