GST Notification 04/2026-CT (Rate) Introduces Reverse Charge Mechanism on Scrap and Waste Materials

The central tax administration issued Notification No. 04/2026-Central Tax (Rate), which establishes the application of the reverse charge mechanism (RCM) on transactions involving scrap and waste materials under the Goods and Services Tax (GST) framework. This order modifies tax liability assignments for specific secondary materials within the commercial supply chain. Under standard GST provisions, the supplier collects and remits tax, whereas the reverse charge mechanism shifts the legal obligation for paying tax directly to the recipient of the goods or services.

This regulatory tool is deployed to curb tax evasion in unorganized commodity segments and improve documentation trails across fragmented supply networks. Shifting compliance duties requires registered buyers to calculate and discharge tax liabilities independently on their inward supplies of scrap and waste. Tax professionals and corporate accountants must update enterprise resource planning systems to account for reverse charge calculations on all scrap purchases and ensure proper self-invoicing.

Businesses need to verify vendor registrations and maintain meticulous documentation to claim eligible input tax credits correctly. Bottom line: Strict adherence to reverse charge rules on scrap prevents unexpected tax demands and interest penalties during departmental audits.