TaxTMI 
TaxTMI 
A dealer who buys all types of scrap from unregistered suppliers and sells it to registered/unregistered persons. Query is whether such dealer can opt for composition scheme ( subject to threshold limit Rs.1.5 Crores ) and pay output tax at 1% irrespective of the rate of tax applicable for each type of scrap items. and also RCM is NOT applicable on his purchases from unregistered dealers u/s 9(3) of CGST Act.
Composition Scheme for Scrap dealers.
13 Jan 2023 
6 Replies 
5892 Views Asked by
Composition scheme eligibility for scrap traders confirmed; intrastate-only supply restriction applies and reverse charge generally not triggered.
A dealer in scrap is not precluded from opting for the composition scheme solely because of being a trader in scrap, subject to the turnover threshold; however, composition taxpayers cannot make inter state supplies. Purchases of scrap from unregistered suppliers do not attract the reverse charge mechanism for a composition dealer, except where the supplier falls within the specific governmental/local authority category noted in the applicable rate notification. (AI Summary)
A dealer in scrap is not precluded from opting for the composition scheme solely because of being a trader in scrap, subject to the turnover threshold; however, composition taxpayers cannot make inter state supplies. Purchases of scrap from unregistered suppliers do not attract the reverse charge mechanism for a composition dealer, except where the supplier falls within the specific governmental/local authority category noted in the applicable rate notification. (AI Summary)