GST tax deduction at source expands to cover waste materials and recycled oils

Under Notification 07/2026-Central Tax, tax deduction at source at the rate of 2 percent applies to business supplies of scrap materials, used cooking oil, plastic items, tyres, metal fragments, and electronic waste effective from 1 November 2026. This regulatory expansion requires specified deductors to withhold the prescribed tax percentage on payments made to suppliers of these designated recyclable materials.

Tax deduction at source mechanisms ensure government revenue collection at the transaction stage by compelling buyers to withhold a portion of the payment and remit it directly to the exchequer on behalf of suppliers. Previously, unorganized scrap markets experienced significant underreporting of turnover, whereas the new mandate integrates these fragmented supply chains into the formal digital tax architecture.

Finance professionals must update enterprise resource planning systems to automatically calculate and deduct the 2 percent tax on applicable scrap and waste transactions starting 1 November 2026. Monitor related notifications for compliance thresholds, and guide vendor networks on filing requirements to ensure seamless credit reflection in electronic ledgers.