TaxTMI 
TaxTMI 
Reverse Charge Mechanism (RCM) for Metal Scrap Recipients
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....everse Charge Mechanism (RCM) for Metal Scrap Recipients<br>By: - Tushar Malik<br>Goods and Services Tax - GST<br>Dated:- 12-2-2025<br>Introduction: Notification No. 06/2024-Central Tax (Rate), dated 8th October 2024, introduces a crucial update in the GST compliance framework by enforcing the Reverse Charge Mechanism (RCM) for registered recipients procuring metal scrap from unregistered supplier....
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....s. This reform is intended to strengthen tax compliance in the metal scrap industry. Key Provisions of the Notification: * Reverse Charge Mechanism (RCM) on Metal Scrap from Unregistered Suppliers: * The notification stipulates that registered recipients purchasing metal scrap classified under Chapters 72 to 81 of the Customs Tariff Act, 1975, from unregistered suppliers must discharge GST li....
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....ability under RCM. * This means that if a registered buyer acquires metal scrap from an unregistered supplier, the buyer must self-assess and remit GST on the transaction. * Applicability to Registered Recipients Only: * This provision is applicable solely to registered recipients procuring metal scrap from unregistered suppliers. * It does not extend to purchases made from another registe....
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....red supplier. * This mechanism ensures GST collection through the recipient under RCM, even if the supplier is not registered. * Applicable Metal Scrap under Chapters 72 to 81: * The metal scrap covered under these chapters includes various base metals such as iron, steel, copper, aluminum, zinc, tin, and others. * If such scrap is obtained from unregistered suppliers, the recipient must a....
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....dhere to RCM provisions. * Rate of Tax under RCM: * The recipient is obligated to pay GST at the standard rate applicable to the specific type of metal scrap (typically 18%) directly to the government. * The recipient is entitled to claim Input Tax Credit (ITC) on the same amount. Objectives Behind the Notification: * Preventing Tax Evasion: * The metal scrap sector has historically bee....
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....n prone to tax evasion, particularly in dealings with unregistered suppliers. * By shifting tax liability to registered recipients under RCM, the government ensures GST compliance, even when the supplier is unregistered. * This approach helps curb tax leakage, as the registered buyer assumes the responsibility for tax remittance. * Encouraging Supplier Registration: * Introducing RCM on pu....
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....rchases from unregistered suppliers serves as an incentive for suppliers to register under GST. * Unregistered suppliers impose an additional compliance burden on buyers, potentially affecting business prospects. * This initiative aims to increase the number of registered entities, thereby improving tax compliance across the sector. * Ensuring Compliance and Accountability: * Registered re....
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....cipients are typically more compliant with tax regulations and better equipped to handle the procedural aspects of RCM. * The government seeks to allocate the compliance responsibility to entities that can effectively fulfill these obligations, ensuring continuous tax collection even in transactions involving unregistered suppliers. * Formalizing the Metal Scrap Industry: * The metal scrap s....
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....ector often involves transactions between unregistered suppliers and larger registered buyers. * By making registered recipients accountable for tax payment under RCM, the government aims to foster a more structured and formalized industry, enhancing overall tax transparency.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....