Background:
Section 23(2) of the CGST Act, 2017 empowers the Government, on the recommendations of the GST Council, to specify the category of persons who may be exempted from obtaining registration. In exercise of this power, Notification No. 5/2017-Central Tax dated 19.06.2017 exempts from registration the persons who are engaged only in making supplies of taxable goods or services, the total tax on which is liable to be paid on reverse charge basis by the recipient under Section 9(3) of the CGST Act. The rationale was that where the entire tax liability on a person’s supplies rests on the recipient, requiring the supplier to register and file returns serves no purpose.
When metal scrap of Chapters 72 to 81 supplied by unregistered persons was brought under reverse charge with effect from 10.10.2024 (Notification No. 06/2024-Central Tax (Rate), on the recommendations of the 54th GST Council), the Council was conscious that an unqualified registration exemption would allow large scrap suppliers to remain unregistered indefinitely, since all their supplies to registered recipients would be on reverse charge. Accordingly, Notification No. 24/2024-Central Tax dated 09.10.2024 inserted a proviso in Notification No. 5/2017-Central Tax providing that the registration exemption shall not apply to any person engaged in the supply of metal scrap of Chapters 72 to 81, so that a metal scrap supplier must obtain registration once its aggregate turnover crosses the threshold under Section 22, and thereafter supply on forward charge (with TDS under Section 51 applying to its B2B supplies).
The 57th GST Council, in its meeting held on 08.10.2026, recommended (para C1(5) of the Press Release) extending the reverse charge mechanism to waste and scrap of plastics, electrical and electronics waste and scrap, waste and scrap of tyres and used cooking oil when supplied by an unregistered person to a registered person, “provided that the supplier shall take registration as and when it crosses threshold limit and the recipient who is liable to pay under RCM shall pay tax even if supplier is under threshold”. The FAQs issued by the CBIC (Q. 12 on goods) clarify that the supplier is required to take registration when its aggregate turnover crosses the threshold limit prescribed under Section 22, and that once the threshold is crossed and registration is obtained, the TDS provisions will apply to its subsequent supplies to registered persons. The reverse charge itself has been notified vide Notification No. 04/2026-Central Tax (Rate) dated 27.10.2026, which is covered in a separate update.
What the Notification provides:
Now, the CBIC vide Notification No. 06/2026-Central Tax dated 27.10.2026 (G.S.R. 934(E)), issued under Section 23(2) of the CGST Act, 2017 on the recommendations of the GST Council, has substituted the proviso to Notification No. 5/2017-Central Tax dated 19.06.2017 (last amended vide Notification No. 24/2024-Central Tax dated 09.10.2024) as under:
“Provided that nothing contained in this notification shall apply to any person engaged in the supply of any of the following goods, namely: – (i) used cooking oil falling under heading 1518 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); (ii) waste and scrap of plastics falling under heading 3915 of the said First Schedule; (iii) waste and scrap of tyres falling under heading 4004 of the said First Schedule; (iv) metal scrap falling under Chapters 72 to 81 of the said First Schedule; or (v) electrical and electronics waste and scrap falling under heading 8549 of the said First Schedule.”
The effect of the substituted proviso is that a person engaged in the supply of any of the five categories of goods cannot claim the exemption from registration under Notification No. 5/2017-Central Tax merely because the tax on such supplies is payable by the recipient under reverse charge. Such a person will be liable to obtain registration under Section 22 of the CGST Act once its aggregate turnover in a financial year exceeds the applicable threshold (₹40 lakh for suppliers exclusively of goods in most States, ₹20 lakh in the special category States of Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand, and ₹10 lakh in Manipur), or earlier where any of the situations of compulsory registration under Section 24 applies (for instance, inter-State taxable supply of goods). Metal scrap, which was already covered by the earlier proviso, continues to be covered.
| Status of the supplier of the specified goods | Position w.e.f. 01.11.2026 |
| Aggregate turnover below the Section 22 threshold and no Section 24 trigger | Registration not required; supplies to registered persons attract reverse charge in the hands of the recipient under Notification No. 04/2026-Central Tax (Rate). |
| Aggregate turnover crosses the threshold | Registration mandatory within 30 days of becoming liable (Section 25(1)); exemption under Notification No. 5/2017-Central Tax not available. After registration, supplies are made on forward charge and B2B supplies attract TDS under Section 51 (Notification No. 07/2026-Central Tax). |
| Making inter-State supplies of the specified goods, or supplying through an e-commerce operator liable to collect TCS | Compulsory registration under Section 24 irrespective of turnover. |
Since the Notification is issued under Section 23(2) of the CGST Act, which applies to Union territories by virtue of Section 21 of the UTGST Act, and the corresponding State notifications are expected to be issued by the States, no separate Integrated Tax or Union Territory Tax notification has been issued.
Effective date:
The Notification comes into force with effect from 1st November, 2026. A supplier of the specified goods whose aggregate turnover has already exceeded the threshold as on that date will become liable for registration from 01.11.2026 and must apply in FORM GST REG-01 within 30 days, i.e., by 30.11.2026. In computing the aggregate turnover under Section 2(6) of the CGST Act, the value of all taxable supplies (including supplies on which tax is payable by the recipient under reverse charge), exempt supplies, exports and inter-State supplies made on the same PAN is to be included.
Key takeaways for taxpayers and the industry:
- Scrap dealers, aggregators and collection agents: Traders of plastic scrap, tyre scrap, e-waste and used cooking oil, and persons who aggregate such material from households, hotels, restaurants, housing societies and small collectors, should compute their aggregate turnover now; those above the threshold must obtain registration by 30.11.2026 and thereafter charge GST on forward charge. Failure to register attracts the consequences under Sections 122(1)(xi) and 73/74A of the CGST Act, and the tax on supplies made after becoming liable to register can be demanded from the supplier.
- Composition levy: A registered dealer in these goods whose aggregate turnover in the preceding financial year did not exceed ₹1.5 crore (₹75 lakh in the specified special category States) may opt for the composition scheme under Section 10 and pay tax at 1% of turnover, provided it makes no inter-State outward supplies and does not supply through an e-commerce operator liable to collect TCS; the recipient, however, will not get ITC on purchases from a composition dealer.
- Registered recipients (recyclers, biodiesel manufacturers, pyrolysis units, e-waste processors): The registration status of each supplier determines the mode of taxation. Supplies from unregistered persons attract reverse charge; supplies from registered persons attract forward charge together with TDS at 2% under Section 51. Vendor masters should capture the GSTIN of suppliers and be updated as small suppliers obtain registration, and the status should be verified on the common portal at the time of each purchase.
- Small suppliers below the threshold: No registration is required, and no tax is to be charged. Such suppliers should maintain records of their turnover to demonstrate that they are below the threshold, as the recipient will discharge the tax under reverse charge on the basis of the supplier being unregistered.
- Inter-State and e-commerce supplies: Suppliers of the specified goods who make inter-State supplies or sell through e-commerce operators are liable to register irrespective of turnover under Section 24; the simplified registration schemes under Rules 14A and 14B of the CGST Rules may be considered by eligible small suppliers.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/N-No.-06-2026-Central-Tax.pdf
