GST TDS Net Expands from 01.11.2026 with New Obligations for Purchasers of Used Cooking Oil and Scrap Goods

GST TDS Framework Expands Beyond Metal Scrap Transactions

Tax Deducted at Source under GST is an important mechanism for ensuring tax compliance and maintaining a reliable record of specified transactions. Although Section 51 of the CGST Act, 2017 originally applied to Government departments, local authorities, and other notified entities, its scope was later extended to registered persons purchasing specified metal scrap from other registered persons.

The Government has now expanded this framework through Notification No. 07/2026-Central Tax, dated 27.10.2026 and effective from 01.11.2026, by bringing used cooking oil, plastic waste and scrap, tyre waste and scrap, and electrical and electronic waste and scrap within the prescribed TDS mechanism. Metal scrap remains covered. The amendment aims to strengthen transaction reporting and tax compliance in sectors where goods frequently pass through multiple dealers, traders, and recycling units.

To facilitate implementation, GSTN issued an advisory dated 01.11.2026 explaining how to obtain TDS registration through FORM GST REG-07. The advisory clarifies how dealers in the newly notified categories should disclose their business category while applying for registration. The development is significant not merely because additional goods have been notified, but because registered purchasers dealing in these goods must examine their TDS obligations and complete the necessary registration formalities.

Section 51 Establishes the Legal Foundation for GST TDS

Section 51(1) of the CGST Act, 2017 authorises specified persons to deduct tax at source when making payments to suppliers of taxable goods or services, where the total value of supply under a contract exceeds Rs. 2.5 lakh, excluding the GST and Compensation Cess components indicated in the invoice.

The effective TDS rate is generally 2%, comprising 1% CGST and 1% SGST or UTGST for intra-State supplies, or 2% IGST for inter-State supplies. The deduction is made from the payment made or credited to the supplier, subject to the statutory conditions. Importantly, the monetary threshold is linked to the value of supply under the contract and should not be confused with the value of an individual invoice or the supplier's monthly turnover.

Section 51 also contains a specific restriction where the supplier and the place of supply are in a State or Union territory different from the recipient's State or Union territory of registration. Consequently, the place-of-supply position must be examined before making a deduction. TDS is a mechanism for collecting tax in advance and does not constitute an additional GST levy on the transaction.

Metal Scrap Purchases Were Brought Within TDS from 10.10.2024

Notification No. 25/2024-Central Tax, dated 09.10.2024, amended Notification No. 50/2018-Central Tax, dated 13.09.2018, by notifying registered persons who receive supplies of metal scrap falling under Chapters 72 to 81 of the First Schedule to the Customs Tariff Act, 1975, from other registered persons.

The amendment took effect from 10.10.2024. Accordingly, registered purchasers of specified metal scrap became liable to comply with Section 51, subject to its prescribed conditions. GSTN subsequently issued an advisory dated 22.10.2024 explaining the TDS registration procedure for such dealers.

The 2024 amendment extended TDS obligations beyond traditional Government and notified institutional deductors to private-sector registered purchasers of specified goods. The latest amendment follows the same approach by extending coverage to four additional categories.

Four Additional Categories of Goods Come Within TDS from 01.11.2026

Notification No. 07/2026-Central Tax substitutes clause (d) of Notification No. 50/2018-Central Tax and specifies the following five categories of goods, including the existing category of metal scrap:

The classification of goods is important. The notification identifies goods by specific tariff headings or chapters, rather than by commercial descriptions alone. Accordingly, a transaction should not be treated as covered solely because the goods are commonly described as waste, scrap or recyclable material. Their correct classification under the Customs Tariff must also be examined.

The amendment applies to a registered person receiving the specified goods from another registered person. Therefore, the purchaser's obligation to deduct TDS depends on the notified goods, the parties' registration status, and the applicable conditions under Section 51. The notification does not automatically impose TDS on every purchase of waste or scrap.

TDS Liability Falls on the Registered Purchaser Rather Than the Supplier

One important distinction warrants particular emphasis. Notification No. 07/2026-Central Tax identifies the registered recipient of specified goods as the person liable to TDS. Thus, when a registered dealer purchases notified scrap from another registered dealer, the purchaser must determine whether tax is deductible under Section 51.

The supplier does not deduct TDS merely because it sells notified goods. Instead, the supplier receives payment after deducting the applicable amount, and the deduction is reflected in the prescribed GST records. However, where the same dealer purchases and sells notified goods, it may act as a TDS deductor on eligible purchases and as a supplier receiving payments subject to TDS on eligible sales.

For example, when a registered plastic scrap dealer purchases goods falling under heading 3915 from another registered person under a contract exceeding Rs. 2.5 lakh, the purchaser must examine the applicable TDS requirement. The fact that the purchaser already holds a regular GST registration does not, by itself, dispense with the separate registration requirements applicable to a tax deductor.

GSTN Prescribes a Specific Procedure for TDS Registration

The GSTN advisory dated 01.11.2026 provides important procedural guidance for dealers in the newly notified categories. Taxpayers seeking TDS registration must use FORM GST REG-07, prescribed for registration of persons required to deduct or collect tax at source, as applicable.

The advisory instructs applicants dealing in the notified categories to select "Others" under the "Constitution of Business" section in Part B of Table 2 of FORM GST REG-07. Upon selecting this option, a text box appears, and the applicant must specify the relevant business category.

For example, the applicant may describe its category as "Used Cooking Oil Dealers", "Waste and Scrap of Plastics Dealers", "Waste and Scrap of Tyres Dealers" or "Electrical and Electronics Waste and Scrap Dealers", as applicable. After entering the relevant description, the applicant must complete the remaining particulars and submit FORM GST REG-07 electronically.

This clarification is important because the portal's category-selection mechanism must accommodate the newly notified goods. However, selecting "Others" is only a procedural requirement for completing the registration application. It does not independently determine whether a particular transaction attracts TDS. That liability must still be examined under Section 51 and the relevant notification.

Regular GST Registration and TDS Registration Serve Different Purposes

A regular GST registration enables a person to comply with the obligations applicable to a supplier of taxable goods or services. TDS registration, on the other hand, enables a person to fulfil statutory obligations as a tax deductor under Section 51.

Consequently, a registered purchaser of notified goods should not assume that its existing regular GSTIN automatically satisfies the TDS registration requirement. When liable to deduct tax, a separate registration under the prescribed TDS framework is required.

Section 24(vi) of the CGST Act, 2017 requires compulsory registration for persons required to deduct tax under Section 51, whether or not they are separately registered under the ordinary registration provisions. Rule 12 governs the application for such registration through FORM GST REG-07.

The practical distinction is that a business may have a regular GST registration for its outward supplies and a separate TDS registration to discharge its deduction obligations. Both registrations serve different statutory purposes and must be maintained accordingly.

TDS Compliance Requires Timely Deduction, Deposit and Return Filing

Once a registered purchaser becomes liable to deduct TDS, compliance does not end with registration. The deductor must determine whether Section 51 applies to the relevant contract, calculate the prescribed deduction, and deposit the amount within the prescribed statutory period.

Under Section 51(2), the deductor must pay the deducted amount to the Government within 10 days after the end of the month in which the deduction is made. The deductor must also furnish the prescribed return in FORM GSTR-7, ordinarily by the tenth day of the succeeding month, subject to applicable statutory extensions.

The deduction is reported through the GST system, and the supplier receives the corresponding credit in its electronic cash ledger as prescribed. This credit is distinct from input tax credit. TDS does not reduce the supplier's taxable turnover or alter the GST rate applicable to the underlying supply.

Failure to comply with GST TDS requirements may result in interest, late fees and penalties. Where TDS has been deducted but not deposited within the prescribed period, interest is payable at 18% per annum under Section 51(6) read with Section 50(1). Delay in filing FORM GSTR-7 attracts a late fee of Rs. 50 per day (CGST Rs. 25 and SGST Rs. 25), subject to a maximum of Rs. 2,000 per return, and no late fee applies where the monthly TDS liability is nil, as per Notification No. 23/2024-Central Tax dated 08.10.2024 and the corresponding State notification. Further, under Section 122(1)(v), failure to deduct TDS, short deduction or failure to deposit deducted TDS may attract a penalty of Rs. 10,000 or the amount not deducted, short-deducted or deducted but not paid, whichever is higher, under the CGST Act, with corresponding provisions under the SGST Act. Accordingly, registered purchasers should identify notified goods, verify contract values, deduct the prescribed tax and ensure timely deposit and filing of FORM GSTR-7.

Practical Illustrations Clarify the Operation of TDS

The following illustrations explain the general application of Section 51 to the newly notified goods, assuming that the parties are registered and the place-of-supply restriction does not prevent deduction.

In Illustration 1, the registered purchaser of plastic scrap must deduct Rs. 8,000, subject to the statutory conditions. In Illustration 2, the contract value does not exceed Rs. 2.5 lakh; therefore, no deduction arises under Section 51 merely because the goods are notified. In Illustration 3, the registered purchaser of electronic scrap must deduct Rs. 12,000 if the transaction meets the prescribed requirements.

These illustrations show that notifying goods does not eliminate the statutory contract-value threshold. Each transaction must be examined under Section 51, the relevant notification, and the applicable place-of-supply provisions.

TDS, Reverse Charge and Compulsory Registration Must Be Distinguished

The expansion of TDS coverage is part of a broader set of amendments affecting specified waste and scrap transactions from 01.11.2026. In particular, Notification No. 04/2026-Central Tax (Rate) dated 27.10.2026 extends the reverse-charge mechanism to specified supplies of used cooking oil, plastic waste and scrap, tyre waste and scrap, and electrical and electronic waste and scrap by unregistered persons to registered persons.

A separate amendment through Notification No. 06/2026-Central Tax dated 27.10.2026 modifies the registration exemption framework under Notification No. 05/2017-Central Tax for persons engaged in supplying specified categories of goods, including metal scrap. These developments are part of broader sector regulation, although the GSTN advisory currently under discussion specifically concerns TDS registration.

The distinction is important. TDS under Section 51 applies to qualifying purchases from registered suppliers, whereas the notified reverse-charge provisions apply to specified purchases from unregistered suppliers. Compulsory registration is a separate statutory issue. Accordingly, the same transaction should not be brought within TDS merely because reverse charge applies, or vice versa.

Accurate Classification and Timely Registration Are Essential for Compliance

The revised framework requires registered purchasers dealing in notified goods to review their procurement transactions carefully. Particular attention should be paid to tariff classification, supplier registration status, contract value, place of supply, and the date from which the relevant notification becomes effective.

Businesses newly brought within the TDS mechanism should also complete their registration formalities through FORM GST REG-07 and ensure that the appropriate category is entered in the text box that appears after selecting "Others". Internal accounting systems should separately identify transactions requiring deduction, the amounts deducted, payments made to suppliers, and the corresponding GSTR-7 reporting obligations.

The GSTN advisory provides the necessary procedural guidance, while Section 51 and the relevant notifications determine the underlying statutory liability. Both must therefore be read together, rather than treating the portal instructions as an independent source of tax liability.

Wider TDS Coverage Must Be Supported by Clear Guidance and Effective Implementation

The extension of GST TDS to used cooking oil, plastic scrap, tyre scrap and electrical and electronic waste marks another step towards strengthening tax compliance in sectors with extensive trading and recycling activities. The amendment builds on the earlier inclusion of metal scrap and expands registered purchasers' responsibility to maintain accurate deduction and reporting records.

However, the reform's effectiveness will depend on proper tariff classification, timely TDS registration, reliable portal functionality, and a clear understanding of the distinction between TDS, reverse charge, and ordinary GST registration. A well-implemented framework should strengthen revenue compliance without creating unnecessary procedural difficulties for genuine businesses.

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