Indian Government: Expands GST Reverse Charge for Waste Scrap

• The Indian Central Government expanded the GST reverse charge mechanism for specific waste and scrap materials.
• This change, effective November 1, 2026, applies when registered persons purchase from unregistered suppliers.
• Affected goods include used cooking oil, plastic scrap, tyre scrap, and electrical and electronics waste and scrap.
• The recipient, if registered, must now pay GST on these supplies under the reverse charge.
• This regulatory update was formalized on October 27, 2026, via Notification No. 04/2026.

Lawyers should advise clients, particularly registered persons in waste management or manufacturing sectors, to review their procurement processes for used cooking oil, plastic, tyre, and e-waste scrap to ensure compliance with the extended GST reverse charge mechanism from November 1, 2026, when dealing with unregistered suppliers.

The Indian Central Government recently announced a significant expansion of the Goods and Services Tax (GST) reverse charge mechanism (RCM), impacting specific waste and scrap materials. This crucial update, issued on October 27, 2026, follows recommendations from the GST Council and mandates that the recipient of certain goods, rather than the supplier, will be responsible for remitting GST to the authorities. This change specifically applies when these materials are procured from an unregistered supplier by a registered person.

This revised framework, which comes into effect on November 1, 2026, targets several key categories of waste. These include used cooking oil, identified under Tariff item 1518, as well as waste and scrap derived from plastics (Tariff item 3915). Additionally, the new rules encompass waste and scrap from tyres (Tariff item 4004) and electrical and electronics waste and scrap, classified under Tariff item 8549. The introduction of this extended India GST reverse charge waste scrap mechanism aims to streamline tax collection and compliance within these sectors.

The reverse charge mechanism (RCM) fundamentally shifts the liability for paying GST from the supplier to the recipient of goods or services. In this specific context, where an unregistered supplier provides the designated waste materials to a registered person, it is the registered recipient who must account for and pay the GST. This ensures that tax is collected even when dealing with smaller, unorganized suppliers who may not be registered under GST. The legal basis for this extension is rooted in several key legislative provisions.

For intra-State supplies, the mechanism is invoked under Section 9(3) of the Central Goods and Services Tax Act, 2017. Similarly, inter-State transactions fall under Section 5(3) of the Integrated Goods and Services Tax Act, 2017. Furthermore, intra-State supplies occurring within Union Territories are governed by Section 7(3) of the Union Territory Goods and Services Tax Act, 2017. This comprehensive application ensures that the GST unregistered supplier RCM applies uniformly across different types of transactions and jurisdictions within India. All relevant provisions of these respective Acts will apply to the recipients now responsible for the tax.

This regulatory amendment, formalized through Notification No. 04/2026 GST, dated October 27, 2026, carries significant implications for businesses operating in the waste management, recycling, and manufacturing sectors. Entities that regularly procure GST reverse charge used cooking oil, plastic scrap, tyre e-waste, or electrical and electronics waste and scrap from unregistered vendors must now adjust their accounting and compliance procedures. The onus is now squarely on the registered buyer to ensure proper GST payment, regardless of the supplier's registration status.

Lawyers should advise clients, particularly registered persons in waste management or manufacturing sectors, to review their procurement processes for used cooking oil, plastic, tyre, and e-waste scrap to ensure compliance with the extended GST reverse charge mechanism from November 1, 2026, when dealing with unregistered suppliers. This proactive review is essential to avoid potential penalties and ensure seamless operations. Businesses need to identify all their unregistered suppliers for these specific goods and establish robust internal controls to manage the reverse charge liability effectively. The change underscores the government's intent to broaden the tax net and enhance compliance in sectors often characterized by informal supply chains.

Lawyers should advise clients, particularly registered persons in waste management or manufacturing sectors, to review their procurement processes for used cooking oil, plastic, tyre, and e-waste scrap to ensure compliance with the extended GST reverse charge mechanism from November 1, 2026, when dealing with unregistered suppliers.

Source: Original reporting via government notification.