GST Amendments Effective from 1 November 2026: Major Changes in TDS on Scrap, RCM, Post-Supply Discounts and Credit Notes

Introduction

The Goods and Services Tax (GST) framework in India is set to undergo important changes from 1 November 2026. Following the recommendations of the 57th GST Council meeting and subsequent notifications issued by the Ministry of Finance, several amendments have been introduced to strengthen tax compliance, improve transaction transparency and simplify certain aspects of GST administration.

The latest GST amendments primarily address four important areas: the expansion of Tax Deduction at Source (TDS) and Reverse Charge Mechanism (RCM) for specified waste and scrap transactions, extension of e-invoicing to recipient-generated invoices under RCM, rationalisation of the conditions governing post-supply discounts, and corresponding amendments to the GST credit note provisions.

These changes are particularly relevant for manufacturers, scrap dealers, recyclers, traders, importers, large businesses, GST practitioners and finance professionals. Businesses will need to review their accounting systems, vendor onboarding procedures, purchase documentation and GST compliance processes to ensure timely implementation.

Let us examine these important GST changes and their practical implications.

1. GST on Scrap Items: Expansion of TDS and Reverse Charge Mechanism (RCM)

One of the change is expansion of the existing TDS and RCM framework to additional categories of waste and scrap goods. The objective is to strengthen the reporting mechanism for transactions in the waste and scrap industry, improve traceability of supplies and bring greater transparency to transactions involving registered and unregistered suppliers.

The changes are effective from 1 November 2026.

A. Expansion of RCM on specified scrap items

Under the Reverse Charge Mechanism (RCM), the responsibility for payment of GST shifts from the supplier to the recipient of goods or services. The Government has amended Notification No. 4/2017-Central Tax (Rate), dated 28 June 2017, through Notification No. 04/2026-Central Tax (Rate), dated 27 October 2026, to extend RCM to additional categories of goods supplied by an unregistered person to a registered person.

The newly covered categories are:

1. Used cooking oil falling under HSN 1518.
2. Waste and scrap of plastics falling under HSN 3915.
3. Waste and scrap of tyres falling under HSN 4004.
4. Electrical and electronics waste and scrap falling under HSN 8549.

The corresponding amendments have also been made under the Integrated GST and Union Territory GST rate notifications.

What about metal scrap?

Metal scrap falling under Chapters 72 to 81 of the Customs Tariff Act, 1975, was already covered under the existing RCM framework introduced in October 2024. Therefore, the November 2026 amendment extends the RCM mechanism to the four additional categories rather than introducing RCM on metal scrap for the first time.

Practical implication

Where a registered person purchases the specified goods from an unregistered supplier, the registered recipient will be responsible for discharging GST under RCM, subject to the applicable provisions.

An important clarification is that the RCM liability of the registered recipient does not depend on whether the unregistered supplier has crossed the applicable registration threshold.

Accordingly, even where the supplier is below the registration threshold, the registered recipient will be required to discharge GST under RCM on the notified supply.

B. Expansion of GST TDS on specified waste and scrap transactions

In addition to RCM, the Government has expanded the applicability of GST TDS under Section 51 of the CGST Act, 2017. Notification No. 07/2026-Central Tax, dated 27 October 2026, amends Notification No. 50/2018-Central Tax, dated 13 September 2018.

With effect from 1 November 2026, the TDS provisions cover supplies of the following goods made by one registered person to another registered person:

Consequently, registered recipients purchasing these specified goods from registered suppliers will be required to deduct GST TDS, subject to the applicable statutory conditions.

Rate and threshold of GST TDS

The applicable GST TDS rate is 2% of the taxable value, excluding GST, comprising:

• 1% CGST and 1% SGST/UTGST in the applicable intra-State transactions; or
• 2% IGST in the applicable inter-State transactions.

The deduction requirement is attracted where the total value of taxable supply under a contract exceeds ₹2,50,000, excluding GST. The other applicable conditions and restrictions under Section 51, including the place-of-supply provisions, will continue to apply.

Example:

Suppose a registered manufacturer purchases plastic scrap worth ₹10,00,000 from a registered scrap dealer. Assuming the transaction satisfies the conditions under Section 51, GST TDS will be calculated as follows: 

The recipient will deduct ₹20,000 from the payment to the supplier and deposit the deducted amount with the Government in accordance with the prescribed procedure. The recipient will also be required to comply with the applicable GST TDS return and certificate requirements, including FORM GSTR-7. It is to be noted that for GST TDS deduction separate GST TDS registration is required if not already obtained.

C. Changes in GST registration requirements for scrap suppliers

Another important consequential amendment has been made through Notification No. 06/2026-Central Tax, dated 27 October 2026.

The notification amends Notification No. 5/2017-Central Tax, dated 19 June 2017, which provides a registration-related exemption to persons exclusively engaged in making taxable supplies on which the entire tax is payable under reverse charge by the recipient. The amended provision excludes suppliers dealing in the following goods from the benefit of this particular registration exemption:

• Used cooking oil;
• Waste and scrap of plastics;
• Waste and scrap of tyres;
• Metal scrap; and
• Electrical and electronics waste and scrap.

Accordingly, suppliers dealing in these specified goods will no longer be able to rely on the above exemption from registration merely because their supplies are wholly covered under RCM. They will be required to obtain GST registration once their aggregate turnover crosses the applicable registration threshold under Section 22 of the CGST Act. However, the registered recipient’s obligation to pay GST under RCM will continue even where the supplier has not crossed the registration threshold.

Key takeaway: The expanded GST framework distinguishes between three situations: RCM on purchases from unregistered suppliers, TDS on purchases from registered suppliers and registration requirements for suppliers of specified waste and scrap.

2. Post-Supply Discounts: Relaxation of Conditions under Section 15(3)(b)

One of the most significant amendments introduced by the Finance Act, 2026, relates to the treatment of post-supply discounts under GST. Section 15 of the CGST Act, 2017, deals with the determination of the value of taxable supply. Before the amendment, Section 15(3)(b) prescribed specific conditions for excluding discounts granted after the supply from the value of supply. The conditions included:

1. The discount should be established through an agreement entered into at or before the time of supply.
2. The discount should be specifically linked to relevant invoices.
3. Input tax credit attributable to the discount should be reversed by the recipient.

The requirement of a prior agreement and specific invoice linkage often created practical difficulties in commercial transactions, particularly where discounts were determined subsequently on the basis of sales performance, annual turnover, quantity targets or other commercial considerations.

A. What is the amendment?

Section 153 of the Finance Act, 2026, substitutes clause (b) of Section 15(3) of the CGST Act. The amended provision states that a discount given after the supply has been effected shall be excluded from the value of supply if:

• A credit note for such discount has been issued by the supplier; and
• Input tax credit attributable to such discount has been reversed by the recipient in accordance with Section 34 of the CGST Act.

The amendment comes into force from 1 November 2026, pursuant to Notification No. 03/2026-Central Tax, dated 26 October 2026.

B. What has been relaxed?

The amendment removes the express statutory requirements that:

• The discount must be established through an agreement entered into at or before the time of supply; and
• The discount must be specifically linked to the relevant invoices.

Instead, the amended provision focuses on the issuance of a credit note by the supplier and reversal of the corresponding input tax credit by the recipient. This is a significant relaxation for businesses that provide post-sale discounts under commercial arrangements.

C. Practical example of post-supply discount

Suppose a manufacturer supplies goods to a distributor during the financial year. The manufacturer subsequently determines that the distributor has achieved a specified annual sales target and becomes eligible for an additional discount of ₹1,00,000. Under the amended provisions, the manufacturer may issue a credit note for the post-supply discount, and the recipient will be required to reverse the input tax credit attributable to that discount. The prior-agreement and invoice-specific linkage requirements under the earlier Section 15(3)(b) are no longer expressly prescribed. Subject to fulfilment of the amended statutory conditions, the supplier may exclude the eligible discount from the value of supply.

D. Business implications

The amendment is particularly relevant for:

• Annual turnover discounts;
• Target-based incentives;
• Volume-based discounts;
• Quantity-linked rebates;
• Dealer and distributor incentives; and
• Post-sale commercial discounts.

It is equally important to distinguish a genuine price discount from an amount paid in consideration for a separate supply of services or other contractual obligations. The amendment should not be interpreted as permitting every post-sale payment or incentive to be treated automatically as a discount.

Key takeaway: The amendment to Section 15(3)(b) provides greater flexibility in the treatment of post-supply discounts by removing the earlier prior-agreement and invoice-linkage requirements while retaining the credit note and corresponding ITC reversal conditions.

3. GST Credit Notes: Amendment to Section 34(1)

The amendment relating to post-supply discounts is accompanied by a corresponding change in Section 34 of the CGST Act, 2017. Section 34 governs the issuance of credit notes and debit notes under GST.

Before the amendment, a registered supplier could issue a credit note in specified situations, including:

• Where the taxable value or tax charged in the original invoice exceeded the taxable value or tax payable;
• Where goods supplied were returned by the recipient; or
• Where goods or services supplied were found to be deficient.

However, the revised Section 15(3)(b) requires the issuance of a credit note for qualifying post-supply discounts. Accordingly, a corresponding amendment to Section 34 was necessary.

A. What has changed?

Section 154 of the Finance Act, 2026, amends Section 34(1) by inserting an additional ground for issuance of a credit note. The amended provision expressly permits the supplier to issue a credit note where a discount referred to in Section 15(3)(b) is given after the supply has been effected. This amendment aligns the credit note provisions with the revised treatment of post-supply discounts. 

The amendment is effective from 1 November 2026.

4. Extension of E-Invoicing to Recipient-Generated Invoices under RCM

Another important GST compliance development relates to the extension of the e-invoicing mechanism to certain invoices generated by recipients under the Reverse Charge Mechanism. Traditionally, the e-invoicing framework has primarily focused on invoices issued by registered suppliers for specified B2B supplies and exports.

However, in certain RCM transactions involving unregistered suppliers, the registered recipient is required to generate a self-invoice under Section 31(3)(f) of the CGST Act, 2017. The Government has now extended the notified e-invoicing framework to cover specified recipient-generated RCM invoices.

A. What is changing?

Notification No. 04/2026-Central Tax, dated 26 October 2026, amends Notification No. 13/2020-Central Tax, dated 21 March 2020. The amendment expands the specified categories of supplies covered under the e-invoicing framework to include:

1. Supplies of goods or services or both made to a registered person.
2. Supplies of goods or services or both made for exports.
3. Supplies received from an unregistered person where GST is payable by the recipient under RCM.
4. Import of services.

The amendment is effective from 1 January 2027. The extension is relevant to registered taxpayers covered by the applicable e-invoicing turnover threshold, currently ₹5 crore aggregate annual turnover.

B. Recipient-generated self-invoices under RCM

Section 31(3)(f) of the CGST Act requires a registered person liable to pay tax under RCM in respect of supplies received from an unregistered supplier to issue an invoice for such supplies. Further, Rule 47A of the CGST Rules prescribes the time limit for issuing such self-invoices, generally within 30 days from the date of receipt of the relevant supply. With the extension of e-invoicing, eligible recipients will also be required to report the specified self-invoices on the Invoice Registration Portal (IRP) and obtain the applicable Invoice Reference Number (IRN).

This introduces a significant change in the compliance responsibility of the recipient, since the recipient will now have to address the applicable e-invoicing requirements for its own RCM self-invoices.

C. Practical implications for businesses

Businesses with aggregate annual turnover of ₹5 crore or more should review their existing RCM compliance procedures and accounting systems. The following steps will be important:

• Identify domestic RCM purchases from unregistered suppliers and import-of-service transactions attracting RCM.
• Ensure timely generation of self-invoices under Section 31(3)(f).
• Configure ERP and accounting systems to support the relevant e-invoice reporting categories.
• Obtain the required IRN and QR code wherever applicable.
• Reconcile self-invoices with RCM liability reported in FORM GSTR-3B.
• Ensure that input tax credit is availed only after satisfying the applicable eligibility and documentation requirements.

Key takeaway: The e-invoicing extension represents an important shift towards greater digital reporting of inward RCM transactions. Eligible recipients will need to prepare their systems for compliance from 1 January 2027.

Conclusion

The GST changes announced for November 2026 represent important developments in GST compliance framework. The expansion of TDS and RCM to specified waste and scrap transactions aims to strengthen transparency and traceability in the recycling and scrap industry. The extension of e-invoicing to specified recipient-generated RCM invoices introduces an additional layer of digital compliance for eligible businesses from January 2027.

At the same time, the amendments to Section 15(3)(b) and Section 34 provide greater flexibility in the treatment of post-supply discounts by removing the earlier prior-agreement and invoice-linkage requirements while retaining the essential conditions of credit note issuance and corresponding ITC reversal. Businesses should carefully evaluate these amendments, update their ERP systems and accounting processes, and ensure that their GST compliance framework reflects the revised statutory requirements.

A proactive approach to understanding and implementing these changes will help businesses improve documentation, strengthen internal controls and minimise avoidable GST compliance issues.

Disclaimer: This article is intended solely for general educational and informational purposes. It does not constitute legal advice, tax advice or an official interpretation of GST law. The article is written with help of AI hence, the applicability of the provisions should be examined with reference to the complete facts, relevant notifications, rules and applicable law.