India's Goods and Services Tax Council (GST Council) proposed to introduce a Reverse Charge Mechanism (RCM) for taxation on ferrous and non-ferrous metal scrap, which might significantly impact the scrap steel industry.

Currently, the seller charges the tax to the buyer. However, under the regulations of the proposed RCM, the buyer will be responsible for paying the tax directly to the government.

The change is intended to simplify the tax collection process and potentially reduce tax evasion, and it is particularly important for transactions involving unregistered metal scrap sellers.

Market participants pointed out that the new provision will make large scrap-based steel mills, the main buyers of ferrous scrap, face greater financial responsibility, and this change may affect their cash flow and operating costs.

On the other side, this simplification may encourage more small-scale sellers to take part in the formal scrap metal market, thereby increasing overall market liquidity and transparency.