India’s governing council for the Goods and Service Tax (GST) has recommended the introduction of a reverse charge mechanism for the levy on ferrous and non-ferrous metal scrap, a government official said on Tuesday, September 10.
Under current GST rules, usually the seller charges the buyer a tax, but under the reverse charge mechanism the buyer will be liable to pay the tax directly to the government.
The council after a meeting said that, if a business is selling metal scrap and is not registered for the GST, it will not need to charge the buyer for a tax. The buyer on the hand who is registered for the GST will then pay the tax directly to the government.
The provision of the reverse charge mechanism states that an unregistered metal scrap seller, with sales exceeding a certain limit, will need to register for the GST. After registration, the same RCM rules mentioned above will apply.
Industry sources said that the new provision is likely to negatively impact large scrap-based steel mills which are buyers of ferrous scrap and they will now be liable to pay the GST. On the other hand, smaller sellers of ferrous scrap will benefit from not having to deal with registration for the GST, collecting the tax and complying with depositing the same with the government.
