Scrap Trade and GST: Why the 18% Tax Is Still Hurting Recycling in India

Learn how reforms can boost formal scrap trade and unlock ₹1.8 lakh crore by 2035

In India, metal scrap is taxed at 18% GST, the same as many new goods. Even with recent reforms, the scrap trade remains at this high rate. For scrap dealers, manufacturers using recycled metal, and our green economy, this matters a lot. In recent weeks, India has pushed forward GST 2.0 reforms to simplify the tax system. The idea is to reduce the number of slabs, clarify rates, improve compliance, and make life easier for businesses, including scrap dealers. Many goods in the 12% slab are proposed to move to 5% or 18% depending on category.

However, scrap has not yet been formally moved to a lower rate in the public announcements, so the scrap trade and recycling sectors remain stuck with 18% GST. This means many of the issues around informal trade and unfair cost still persist.

Problems Caused by 18% GST for Scrap

Informal Trade Remains Strong

Because many small scrap dealers can’t afford the paperwork, tax registration, or the extra cost that comes with the 18% rate, they often operate informally. Transactions are mostly cash-based and unrecorded. Under the Reverse Charge Mechanism (RCM) the buyer (a registered business) is responsible for paying GST if the seller is unregistered. Meanwhile, informal sellers avoid compliance and tax burdens, giving them unfair advantage over honest traders.

Government Revenue Loss and Market Distortion

A new report by the Centre for Science and Environment (CSE) highlights that the current GST structure causes large revenue losses due to unrecorded sales in scrap, e-waste, plastics, and other waste streams. The report estimates an annual loss of about ₹65,000 crore due to these unrecorded/informal transactions, which could rise to ₹86,700 crore by 2035 if no action is taken.

It also finds that if the current structure continues, the government is losing the chance to unlock up to ₹1.8 lakh crore in additional revenue by 2035 through reforms in GST on waste materials.

How Does This Affect Scrapcart and the Scrap Trade Overall

At Scrapcart, we push for compliance, transparency, quality, and fairness. The high 18% GST rate adds cost, risk, and complexity for everyone involved in scrap trading. Our belief is that fairer tax treatment for scrap can do many good things:

• Encourage more scrap dealers to get formal, register properly, pay taxes.
• Reduce fake invoicing, fraud, and unfair competition.
• Lower the cost of recycled metal and make green steel more viable.
• Help the government collect more revenue legitimately.

With reforms underway and public focus on simplifying GST, there is reason to hope. If GST on scrap or waste streams is rationalised (lowered or differentiated between virgin vs recycled materials), then honest scrap businesses will gain ground.

Even after GST reforms, the 18% tax on metal scrap still carries a heavy weight for dealers, recyclers, and the circular economy in India. Scrapcart remains committed to verified, compliant scrap trade. Through its stringent validation check mechanism, Scrapcart ensures only GST-compliant Buyers and Sellers are listed on the platform. But real change means the GST policy must become fairer. Scrap waste should not be taxed like brand-new raw material. If we reward recycling, support formal trade, and remove unfair tax burdens, India can grow its scrap trade, reduce waste, and power green steel.