Plastic Waste Scrap Brought Under Reverse Charge and 2% GST TDS

How do the latest tax notifications change how your washing or pelletizing plant sources raw plastic scrap? Under new rules effective 1 November 2026, registered recyclers buying plastic waste from unregistered suppliers are subject to the reverse charge mechanism. This shift extends the compliance and tax deduction framework previously established for metal scrap directly into the plastic recycling sector.

Reverse Charge Mechanism Extended to Plastic Waste

The Central Board of Indirect Taxes and Customs issued Notifications 2/2026 to 10/2026-Central Tax (Rate) on 27 October 2026, acting largely on recommendations from the 57th GST Council meeting. Notification 4/2026-CT(R) explicitly amends tax liability rules for plastic waste and scrap. When an unregistered seller supplies plastic waste to a registered recipient, the reverse charge mechanism applies, placing the tax payment obligation directly on the buyer.

This extension aligns plastic scrap with other secondary raw material streams. The reverse charge framework now simultaneously covers used cooking oil, tyre waste and scrap, electronic waste, and plastic scrap sold by unregistered entities.

Mandatory 2% GST TDS on Qualifying Scrap Contracts

Procedure changes introduced under Notifications 6/2026 and 7/2026-Central Tax require registered buyers to adjust their procurement systems for tax deduction at source. Registered plants must examine their liability to deduct 2% GST TDS on qualifying purchases of plastic waste and scrap.

This statutory deduction applies to qualifying supply contracts exceeding ₹2.5 lakh. Buyers must verify supplier registration statuses and ensure proper administrative mechanics are active for every qualifying scrap contract.

Compliance Actions for Recycling Plant Operators

Recyclers must immediately update internal tax classifications and review input tax credit conditions to remain compliant. Plants buying plastic bales or unground scrap need to audit all active supplier relationships to confirm whether scrap vendors are registered under the GST portal.

For contracts executed around the transition date, buyers must apply the transitional provisions of Section 14 of the CGST Act. Verifying seller registration status before closing scrap orders prevents administrative discrepancies under the revised scrap procurement framework.