Background:
Notification No. 4/2017-Central Tax (Rate) dated 28.06.2017, issued under Section 9(3) of the CGST Act, 2017, specifies the goods on the intra-State supply of which central tax is payable on reverse charge basis by the recipient. The Table to the said notification presently covers cashew nuts (S. No. 1), bidi wrapper leaves (S. No. 2), tobacco leaves (S. No. 3), specified essential oils (S. No. 3A), silk yarn (S. No. 4), raw cotton (S. No. 4A), lottery (S. No. 5), used vehicles, seized and confiscated goods, old and used goods, waste and scrap supplied by Government (S. No. 6), priority sector lending certificates (S. No. 7) and metal scrap of Chapters 72 to 81 supplied by an unregistered person (S. No. 8).
The metal scrap entry (S. No. 8) was inserted with effect from 10.10.2024 vide Notification No. 06/2024-Central Tax (Rate) on the recommendations of the 54th GST Council, as a measure to check tax evasion in the scrap trade, where supplies originate from a large number of unorganised and unregistered suppliers.
The 57th GST Council recommended (para C1(5) of the Press Release) extending the same framework to four more categories of waste and scrap, namely waste and scrap of plastics, electrical and electronics waste and scrap, waste and scrap of tyres, and used cooking oil, i.e., (a) reverse charge when such goods are supplied by an unregistered person to a registered person, with the recipient liable to pay tax even where the supplier is below the threshold, (b) the supplier to take registration as and when it crosses the threshold limit, and (c) TDS @ 2% when such goods are supplied by a registered person to a registered person. The FAQs issued by the CBIC (Q. 8 to Q. 14 on goods) explain that the mechanism is on the lines of the one already in place for metal scrap.
What the Notification provides:
Now, the CBIC vide Notification No. 04/2026-Central Tax (Rate) dated 27.10.2026 (G.S.R. 927(E)), issued under Section 9(3) of the CGST Act, 2017 on the recommendations of the GST Council, has amended the Table to Notification No. 4/2017-Central Tax (Rate) by inserting the following entries:
| S. No. | Tariff item / heading | Description of supply of goods | Supplier of goods | Recipient of supply |
| 2A (after S. No. 2) | 1518 | Used cooking oil | Any unregistered person | Any registered person |
| 3B (after S. No. 3A) | 3915 | Waste and scrap of plastics | Any unregistered person | Any registered person |
| 3C | 4004 | Waste and scrap of tyres | Any unregistered person | Any registered person |
| 9 (after S. No. 8) | 8549 | Electrical and electronics waste and scrap | Any unregistered person | Any registered person |
Accordingly, with effect from 01.11.2026, a registered person receiving any of the above goods from an unregistered person shall be liable to pay central tax (and the corresponding State tax/UTGST, or integrated tax on inter-State supplies) on reverse charge basis under Section 9(3) of the CGST Act, at the rate applicable to such goods under Notification No. 9/2025-Central Tax (Rate), and all the provisions of the Act shall apply to such recipient as if he were the person liable to pay tax. Parallel amendments have been made vide Notification No. 04/2026-Integrated Tax (Rate) dated 27.10.2026 (G.S.R. 928(E)) in Notification No. 4/2017-Integrated Tax (Rate) and Notification No. 04/2026-Union Territory Tax (Rate) dated 27.10.2026 (G.S.R. 929(E)) in Notification No. 4/2017-Union Territory Tax (Rate). The related measures on registration of suppliers of these goods (Notification No. 06/2026-Central Tax) and TDS on their B2B supplies (Notification No. 07/2026-Central Tax), both dated 27.10.2026, are covered in separate updates.
| Nature of supply of the specified waste and scrap / used cooking oil | Position w.e.f. 01.11.2026 |
| Unregistered supplier to registered recipient | Recipient pays GST under reverse charge (Section 9(3)) at the rate applicable to the goods; liability arises even if the supplier is below the registration threshold. |
| Registered supplier to registered recipient | Supplier charges GST on forward charge; no reverse charge on the recipient. |
| Any supplier to unregistered recipient (B2C) | Forward charge by the supplier, if registered; no reverse charge. |
Effective date:
The Notification comes into force with effect from 1st November, 2026. Reverse charge will apply to supplies received from unregistered persons where the time of supply under Section 12(3) of the CGST Act (date of receipt of goods, date of payment or the 31st day from the supplier’s invoice, whichever is earliest) falls on or after 01.11.2026.
Key takeaways for taxpayers and the industry:
- Affected sectors: Biodiesel manufacturers and aggregators procuring used cooking oil (including under the Repurpose Used Cooking Oil initiative), plastic recyclers and granule manufacturers, tyre pyrolysis and crumb rubber units, and e-waste recyclers and dismantlers registered under the E-Waste (Management) Rules, 2022, who procure from kabadiwalas, collection agents, hotels and restaurants, housing societies and other unregistered sources, will now bear the compliance of reverse charge.
- Compliance under reverse charge: The recipient must issue a self-invoice under Section 31(3)(f) within 30 days of receipt of the supply (Rule 47A), issue a payment voucher under Section 31(3)(g), discharge the liability in cash (reverse charge liability cannot be set off against ITC), report it in Table 3.1(d) of FORM GSTR-3B and claim ITC in Table 4(A)(3) subject to Section 16 and Section 17. Notably, vide Notification No. 04/2026-Central Tax dated 26.10.2026, e-invoicing has been extended to self-invoices for reverse-charge supplies received from unregistered persons with effect from 01.01.2027 for taxpayers with aggregate turnover exceeding ₹5 crore; recyclers covered by e-invoicing must therefore also plan for IRN generation on such self-invoices.
- ITC and cash flow: ITC of the tax paid under reverse charge is available to the recipient in the same month, so the net cost for recyclers with taxable outputs is a cash-flow cost rather than a tax cost. Units whose output is exempt or at a lower rate should evaluate the impact on their ITC accumulation.
- Unregistered suppliers: Small scrap collectors and traders below the threshold need not register, and the recipient will pay tax under RCM. However, once the aggregate turnover crosses the threshold under Section 22 (₹40 lakh/₹20 lakh/₹10 lakh for goods, as applicable), registration becomes mandatory and thereafter supplies must be made on forward charge.
- Vendor master and contracts: Businesses should classify their scrap vendors into registered and unregistered categories, re-negotiate pricing (since RCM tax will now be borne by the recipient on purchases from unregistered persons) and update ERP systems for RCM accounting and self-invoicing from 01.11.2026.
Similar notifications have been passed under the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and the Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/N.-No.-04-2026-CT-UT-IG-Rate.pdf
