The Central Government has widened the exclusion from the special GST registration exemption available to persons whose entire taxable outward supplies attract reverse charge. The change takes effect on 1 November 2026, under Notification No. 06/2026–Central Tax, dated 27 October 2026, which amends Notification No. 5/2017–Central Tax. 

For eligible businesses exclusively supplying goods in Andhra Pradesh, registration becomes necessary when aggregate turnover exceeds ₹40 lakh, subject to the conditions governing that threshold and any compulsory registration requirement. The buyer’s payment of GST under reverse charge does not remove the supplier’s registration obligation. However, the amendment does not make registration compulsory for every small scrap collector irrespective of turnover. 

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What Was the RCM-Based Registration Exemption?

Notification No. 5/2017–Central Tax, dated 19 June 2017, exempts persons engaged exclusively in making taxable supplies on which the entire GST is payable by recipients under Section 9(3) of the CGST Act.

This exemption allowed qualifying suppliers to remain outside registration because recipients discharged the tax liability. It was a specific statutory exemption: reverse charge, by itself, does not automatically exempt every supplier from registration.

Which Goods Are Covered?

The substituted proviso excludes persons supplying the following goods from the benefit of Notification No. 5/2017:

The descriptions and tariff classifications matter. Businesses should verify that their goods fall within the specified entries; an item being second-hand does not necessarily make it waste or scrap under these headings. 

Metal Scrap Dealers Were Already Excluded

The restriction is not entirely new for the scrap sector.

Notification No. 24/2024–Central Tax, dated 9 October 2024, had already excluded suppliers of metal scrap falling under Chapters 72 to 81 from the RCM-based registration exemption, with effect from 10 October 2024.

The latest amendment expands that exclusion to four additional categories while retaining metal scrap. Consequently, metal scrap dealers cannot treat 1 November 2026 as the first date on which their registration obligations arise. Any earlier liability must be examined separately. 

How the ₹40 Lakh Threshold Applies in Andhra Pradesh

The ₹40 lakh exemption for eligible persons exclusively supplying goods originates from Notification No. 10/2019–Central Tax, read with the GST registration provisions. Notification No. 06/2026 does not itself prescribe a ₹40 lakh threshold.

An Andhra Pradesh supplier must therefore establish eligibility for the goods-only exemption. The notification excludes, among others, persons required to obtain compulsory registration under Section 24. Businesses supplying services along with goods should also examine their position instead of automatically applying the ₹40 lakh limit.

The threshold is not uniform across every State. Further, the relevant wording is “exceeds” ₹40 lakh: turnover of exactly ₹40 lakh does not, by itself, breach that particular limit, although another registration trigger may apply. 

Sales Taxed Under RCM Still Count Towards Turnover

A significant compliance issue is the calculation of aggregate turnover.

Section 2(6) of the CGST Act requires turnover to be calculated on an all-India basis for persons having the same PAN. It includes taxable outward supplies, exempt supplies, exports and inter-State supplies, while excluding GST and cess.

Sales on which the recipient pays tax under reverse charge remain outward supplies of the seller and count towards the seller’s aggregate turnover. The exclusion for inward supplies attracting reverse charge relates to purchases received by that person. 

For illustration, an eligible Andhra Pradesh dealer making ₹28 lakh of plastic scrap sales and ₹15 lakh of tyre scrap sales under the same PAN has aggregate sales of ₹43 lakh. The dealer cannot apply a separate ₹40 lakh limit to each category.

Likewise, selling to several recycling units does not create a separate threshold for each buyer.

Why the Buyer’s RCM Payment Does Not Protect the Seller

The changes operate alongside Notification No. 04/2026–Central Tax (Rate), dated 27 October 2026, which expands reverse charge to specified additional goods supplied by unregistered persons to registered persons from 1 November 2026.

The GST Council’s recommendation expressly linked the expanded RCM framework with the requirement that suppliers obtain registration when they cross the applicable threshold. Registered recipients would pay RCM even where the unregistered supplier remained below that threshold. 

The practical position is therefore:

Businesses should reconcile the effective date of registration and transactions during the transition rather than assume that RCM can continue indefinitely. 

Turnover Does Not Restart on November 1

The effective date changes the availability of the exemption. It does not reset the financial year’s turnover.

Dealers must review their cumulative turnover for FY 2026–27, including supplies made before November. A newly covered supplier whose turnover already exceeds the applicable limit must assess registration liability when the exemption ceases to apply.

Section 25(1) generally requires an application within 30 days from the date the person becomes liable to registration. This application period should not be treated as an extension of the exemption or a reason to disregard an earlier registration obligation. 

Registered Buyers Must Also Examine GST TDS

The changes also affect transactions between registered businesses.

Notification No. 07/2026–Central Tax, dated 27 October 2026, expands the notified TDS framework to registered persons receiving the five specified categories of goods from another registered person, effective 1 November 2026. 

TDS remains subject to Section 51, including the requirement that the taxable value of supplies under a contract exceeds ₹2.5 lakh, excluding GST, and the relevant place-of-supply exception. It should therefore not be described as an automatic deduction on every scrap purchase invoice. For applicable intra-State transactions, the combined deduction is generally 2%—1% CGST and 1% SGST. 

What Dealers and Recyclers Should Do

Suppliers should reconcile their financial-year turnover across businesses operating under the same PAN, verify the classification of goods and identify when registration becomes compulsory.

Registered recyclers, processors and other buyers should update supplier GSTIN records and distinguish purchases from unregistered suppliers attracting RCM from purchases from registered suppliers requiring normal invoicing and, where applicable, TDS.

The central compliance point is that payment of GST by the buyer cannot substitute for registration by a supplier who is legally required to register.

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