GST REG-07 for Metal Scrap Buyers: Registration, RCM and TDS Rules

GST REG-07 is the registration form used by metal scrap buyers to register as a tax deductor for TDS on scrap purchases from registered suppliers. This requirement is part of a broader reform effective from 10th October 2024: metal scrap purchases from unregistered suppliers were brought under the Reverse Charge Mechanism (RCM), while purchases from registered suppliers above ₹2.5 lakh attract 2% TDS, and REG-07 is how a buyer registers to deduct that TDS.

How to Complete GST REG-07 for Metal Scrap Buyers

REG-07 is a separate registration from your regular GSTIN; it specifically registers you as a tax deductor for TDS purposes. You need it if you buy metal scrap from a registered supplier and the contract value exceeds ₹2.5 lakh.

Who needs to file REG-07 for metal scrap:

• Registered businesses purchasing metal scrap (Customs Tariff Chapters 72–81, iron, steel, copper, aluminium, and other base metals) from a registered supplier
• Where the contract value of the transaction exceeds ₹2.5 lakh
• Buyers who do not already hold a separate TDS deductor registration for this purpose

Step-by-step: Completing the REG-07 form

1. Access Form GST REG-07 through the GST common portal.
2. In Part B, Table 2, under “Constitution of Business,” select “Others.”
3. A text box will appear once “Others” is selected. Enter “Metal Scrap Dealers.” This entry is mandatory for buyers registering for this purpose.
4. Complete the remaining fields in REG-07, including DDO/Tax Deductor PAN, Aadhaar, and proof of business premises, and submit through the portal.
5. Once approved, you’ll receive a separate TDS registration (distinct from your regular GSTIN), which you’ll use when filing GSTR-7.

This requirement was clarified by GSTN in an advisory dated 13th October 2024, aligning with Notification No. 25/2024-Central Tax, dated 9th October 2024.

After registration, your ongoing TDS compliance:

• TDS rate: 2% of taxable value (1% CGST + 1% SGST intra-state; 2% IGST inter-state)
• Threshold: applies only where contract value exceeds ₹2.5 lakh
• Filing: report TDS deductions in GSTR-7 by the 10th of the following month
• Certificate: a GSTR-7A certificate is generated for the supplier confirming deduction and deposit
• Supplier credit: the deducted TDS reflects in the supplier’s electronic cash ledger, usable to offset their own GST liability

Why this matters if you skip it: Buyers who haven’t completed REG-07 registration but are required to deduct TDS risk are being unable to report it correctly, exposing both the buyer and their scrap-dealer supplier to compliance gaps and potential penalty exposure.

When RCM Applies Instead of TDS

TDS and REG-07 apply only when buying from a registered supplier. A different rule applies when the supplier is unregistered.

Effective the same date, 10th October 2024, under Notification No. 06/2024-Central Tax (Rate), metal scrap purchases from unregistered suppliers were brought under Reverse Charge Mechanism (RCM):

• The buyer, not the seller, becomes liable to pay GST at 18%.
• The unregistered supplier does not collect or remit GST on the sale.
• The registered buyer must issue a self-invoice within 30 days of receiving the supply.
• ITC is available on GST paid under RCM, so for an otherwise-eligible buyer, the cash impact is largely a timing effect rather than a permanent cost.

A related change closed a registration loophole: scrap suppliers could previously claim exemption from GST registration even above the turnover threshold, provided their supplies were entirely under RCM. Notification No. 24/2024-Central Tax removed that exemption specifically for metal scrap suppliers once their turnover crosses the threshold, they must register and move to paying GST directly under Forward Charge Mechanism, rather than relying on the buyer to cover it via RCM indefinitely.

Quick reference: Which rule applies?

GST Rate and HSN Code on Scrap Sale

Correct HSN classification determines the rate charged and matters beyond labeling it’s a common trigger point for ITC mismatches and scrutiny on both sides of a scrap transaction. If turnover exceeds ₹5 crore, 6-digit HSN reporting is mandatory on invoices; below that, 4-digit codes are generally accepted for B2B supplies.

Advisory on Bank Account Validation for GST Registration

Separately, GSTN has implemented a validation process for non-core amendments to bank account details on the GST portal. If you’re updating bank details, including as part of completing REG-07 or other registration changes, follow the procedure in GSTN’s official advisory.

Reference: GST Bank Account Validation Advisory (PDF)

How MBG Supports GST Compliance for Scrap Transactions

Registering correctly under REG-07, applying RCM and TDS to the right transactions, and classifying scrap under the correct HSN code all carry real penalty exposure if missed. MBG’s GST Advisory and Compliance team helps scrap buyers and dealers build compliant registration, deduction, and invoicing processes. To review your current compliance position, connect with our GST advisory team.

Looking for Scrap Audit or Validation Services Instead?

If you’re looking for scrap audit, weighment, or vendor validation services covering scrap vendor due diligence, gate controls, stock yard management, and invoicing accuracy rather than GST registration or tax compliance, that’s a separate MBG offering: Scrap Validation Services under Risk Advisory.

Additional Resources

• GST Registration Requirements and Applicability Thresholds in India
• GST Registration Delays and Procedural Compliance Challenges
• GST Compliance Risk Management and Advisory Services
• RCM Liability/ITC Statement: A Complete GST Compliance Guide