There is no single "scrap law" in India. A business that sells or buys industrial scrap is touched by tax law, environmental rules, foreign trade policy, weights and measures law, pollution control, workplace safety and criminal law. Each covers a different part of the transaction. This guide maps the main rules so that factories, contractors, traders, mills and recyclers know which obligations apply and when to involve their accountant, lawyer or environmental consultant.
This is general information, not legal or tax advice. Rules are amended frequently and vary by state. Confirm current requirements with qualified professionals and the relevant authorities before acting.
1. GST on scrap sales
Scrap is "goods" under GST, and selling it in the course of business is a taxable supply. Most metal scrap attracts 18% GST, with the rate determined by the HSN code (for example 7204 for ferrous scrap, 7404 for copper and copper-alloy scrap, 7602 for aluminium scrap).
Two measures introduced with effect from 10 October 2024 changed how metal scrap is taxed:
- Reverse charge: when an unregistered person supplies metal scrap (Chapters 72–81) to a registered person, the registered buyer pays the GST under reverse charge and issues a self-invoice.
- GST TDS: registered buyers deduct 2% TDS under GST on supplies of metal scrap from registered suppliers where the contract value exceeds the notified threshold (₹2.5 lakh). The seller receives credit in the electronic cash ledger.
What this means in practice: sellers issue proper tax invoices with correct HSN codes; buyers register as TDS deductors where required and keep supplier KYC; both reconcile GST returns monthly. Our detailed guide on GST on scrap sale includes a worked example.
2. Income tax: TCS on scrap
The Income Tax Act has required sellers of scrap to collect tax at source from buyers under section 206C(1), historically at 1%, with exemptions in some cases (for example, where scrap is bought for manufacturing with the prescribed declaration). Income tax provisions are revised through annual Finance Acts, so confirm the position for the current year with your chartered accountant.
3. E-way bills and movement documents
Moving goods above the value threshold (generally ₹50,000, with state-specific rules for intra-state movement) requires an e-way bill. For scrap, the e-way bill should match the invoice in HSN, quantity and value. Weighbridge weight is the basis for quantity, so weigh before finalising the invoice where possible. Keep gate passes and material challans with every dispatch.
4. Hazardous and other wastes
The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 govern generation, storage, transport, recycling and import of hazardous and other wastes. For industrial scrap businesses, the most common touchpoints are:
- Used and waste oil – for example transformer and hydraulic oil – which must go to authorised re-refiners or recyclers.
- Contaminated containers and residues from chemical, paint or process use.
- Import conditions for metal scrap and other wastes listed in the rules' schedules.
- Authorisation from the State Pollution Control Board for occupiers who generate, store or recycle hazardous waste above specified thresholds, with records and annual returns.
Sellers should never pass hazardous material through general scrap channels. Buyers and recyclers handling such streams need the relevant authorisations.
5. E-waste
The E-Waste (Management) Rules, 2022, in force from 1 April 2023, introduced an Extended Producer Responsibility (EPR) system run through a Central Pollution Control Board portal. Producers have recycling targets; manufacturers, producers, refurbishers and recyclers must register. Bulk consumers – large organisations, institutions and industries – must hand over e-waste only to registered producers, refurbishers or recyclers and keep records. Data-bearing devices should be wiped or destroyed with certificates. See our guide to e-waste disposal for companies.
6. Batteries
The Battery Waste Management Rules, 2022 cover all battery chemistries, including lead-acid and lithium-ion, with EPR obligations for producers and registration of recyclers and refurbishers. Consumers and bulk users should return waste batteries through producers' collection systems or to registered recyclers and refurbishers, not to informal smelters. Store batteries safely and keep disposal records. Our battery scrap guide covers storage and collection.
7. Plastics and packaging
Plastic packaging waste is covered by the Plastic Waste Management Rules, 2016 (as amended), including EPR obligations for producers, importers and brand owners and registration requirements for plastic waste processors. Factories selling plastic scrap and packaging should use registered processors, especially when the buyer needs records for EPR compliance.
8. Importing and exporting scrap
Scrap imports are governed by the Foreign Trade Policy and ITC(HS) schedules, the hazardous waste rules and customs law. Key requirements for metal scrap imports include an Importer-Exporter Code (IEC), a pre-shipment inspection certificate (PSIC) from an inspection agency recognised by DGFT, radiation checks and customs clearance. DGFT updates its list of recognised agencies, so check it before contracting. Exports require checking the export policy for each HS code. See how to import scrap into India and how to export scrap from India.
9. Weighbridges and legal metrology
Weighing instruments used in trade, including weighbridges, are regulated under the Legal Metrology Act, 2009 and must be verified and stamped at prescribed intervals. For scrap, this means settling on verified weighbridges and calibrated scales, keeping printed slips with vehicle numbers and times, and recording tare and gross weights. Our weighbridge guide covers common weight disputes.
10. Pollution control consents for processors
Units that process scrap – shredders, melting units, cable granulators, battery and e-waste recyclers – generally require Consent to Establish and Consent to Operate from the State Pollution Control Board under the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981, in addition to any authorisations under waste rules. Pure traders who do not process material have fewer obligations, but storage yards may still be subject to local rules.
11. Vehicle scrapping
End-of-life vehicles are scrapped through Registered Vehicle Scrapping Facilities (RVSFs) under the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021. RVSFs must follow depollution and dismantling norms and issue certificates of deposit. Buyers of vehicle scrap benefit from sourcing through RVSFs, which provide documented, depolluted material. The Steel Scrap Recycling Policy, 2019 provides the broader framework for organised scrapping centres.
12. Stolen property and source verification
Scrap trades can attract stolen material – cable, rails, transformers, manhole covers. Under criminal law (the Bharatiya Nyaya Sanhita, 2023, which replaced the Indian Penal Code from 1 July 2024), receiving or retaining stolen property is an offence. Buyers should verify sellers' identity and GST registration, ask for source documents for sensitive items such as utility cable and railway material, and refuse suspicious lots. Sellers protect themselves by selling only to registered, documented buyers.
13. Workplace safety in dismantling
Plant dismantling and heavy scrap handling involve gas cutting, work at height and heavy lifting. Factory owners retain responsibilities under applicable labour and safety laws for work on their premises. Use contractors with method statements, hot work permits, certified lifting equipment, PPE and insurance. Our plant dismantling guide includes a checklist.
14. Local trade licences
Municipal bodies and states may require trade licences or registrations for scrap yards and dealers, and may restrict storage in certain zones. Requirements vary widely, so check with the local municipal authority for your yard location.
A compliance checklist for scrap sellers
- Sell only to GST-registered buyers and verify their GSTIN.
- Issue tax invoices with correct HSN codes; generate e-way bills where required.
- Track GST TDS credits and check TCS applicability.
- Weigh on verified weighbridges and keep slips.
- Route e-waste, batteries, used oil and hazardous items only to registered or authorised handlers and keep certificates.
- Follow internal approval and asset write-off procedures.
- Use safe, insured contractors for dismantling.
A compliance checklist for scrap buyers and recyclers
- Register for GST TDS where required and handle reverse charge on purchases from unregistered persons.
- Maintain supplier KYC and source documentation, especially for sensitive items.
- Hold the pollution consents and waste authorisations your processing requires.
- For imports, verify PSIC agencies and keep complete customs records.
- Use verified weighing instruments and reconcile weights with suppliers.
- File returns and records required under waste rules and EPR systems.
How Kabadi24 supports compliance
Every Kabadi24 transaction is documented: GST invoices with HSN codes, e-way bills, verified weighbridge slips and payment to company accounts. Counterparties are verified before contact details are shared, and e-waste, batteries, oil and hazardous items are routed only to registered or authorised handlers with certificates. Our trade desk at the Ramnagar, Varanasi head office handles import documentation and PSIC checks for container trades.
Conclusion
Scrap compliance in India is a patchwork of tax, environmental, trade, metrology, pollution, safety and criminal law. Most of it reduces to a few habits: deal with verified, registered counterparties; document every lot; weigh on verified instruments; and route hazardous streams only to authorised handlers. Businesses that build these habits avoid penalties and earn the trust of the larger buyers and sellers who increasingly insist on clean, documented trade.