The term “Scrap” has not been defined in GST Laws. In GST regime, in order to be taxable, the waste and scrap does not have to pass the test of manufacture or mechanical process or marketability. It is admittedly as ‘supply’ in course of business.
While taxability of waste and scrap is no longer contentious, finding proper HSN (Harmonized System of Nomenclature) code is definitely a tedious task. The highest rate for scraps material is 18%. HSN code is a 6-digit code that categorizes 5000+ products. It is a uniform code which is accepted worldwide.
While HSN entry for waste and scrap of materials like plastic, aluminum, iron and steel etc. exists as it did in the previous regime, a number of waste and scrap like rejected/ shredded finished/semi-finished goods or raw material, non-segregated scrap have no entry. Following a conservative approach, tax payer might try to find solace in residual Entry 453 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28th June, 2017 but it is a temporary respite as:
1) While the entry provides for rate of tax, it doesn’t provide HSN classification as it says “Any Chapter”
2) A number of inputs and finished goods will have tax rate lower than 18% while its waste and scrap would become taxable at 18% [CGST + SGST].
Most manufacturing locations cannot store waste and scrap for a period longer than 6-7 working days as such an accumulation would hamper production and could be hazardous. Thus, the registered person has to clear waste and scrap at some rate and under some tariff classification yearning for clarity.
GST RATE CHART OF SCRAP MATERIALS
|HSN Code||Description||GST Rate|
|3915||Plastic waste, parings or scrap||5%|
|4004 00 00||Rubber waste, parings or scrap||5%|
|4017 00 20||Hard Rubber waste or scrap||5%|
|4415||Packing cases, Box, Crates, Drums||5%|
|4707||Paper waste or scrap||5%|
|7001||Cullet or other waste or scrap of Glass||5%|
|7112||Waste and scrap of precious metal||3%|
|7204||MS Scrap all types||18%|
|7204||Scrap US Rail||18%|
|7404||Copper Waste & Scrap||18%|
|7503||Nickel Waste & Scrap||18%|
|7602||Aluminium Waste & Scrap||18%|
|7902||Zinc Waste & Scrap||18%|
|8002||Tin Waste & Scrap||18%|
|8548||Waste and scrap of primary Cells primary batteries and electric accumulators||18%|
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