Customs Duty on Metal Scrap Imports: What FY 2026 Changes Mean for Indian Mills

Updated: September 20, 2026 · 16 min read

The Union Budget 2025-26 extended the nil Basic Customs Duty window on certain ferrous scrap categories by twelve months — a quiet line in the Finance Bill that saved India’s electric-arc furnace (EAF) sector an estimated ₹2,200 crore in landed-cost relief over the intervening period. That window is now due for review in the FY 2026-27 budget cycle, and with global scrap prices on the London Metal Exchange remaining volatile through mid-2026, procurement heads at mills from Raipur to Hospet are once again recalculating whether importing makes sense — or whether domestic recycled supply has finally closed the gap.

This article maps the current metal scrap import duty India framework: what rates apply, which Customs Notifications matter, how BIS Quality Control Orders have reshuffled port-clearance timelines, and how DGFT licensing under the Foreign Trade Policy 2023 affects your import authorisation. It ends with a frank comparison of the total landed cost of imported scrap versus domestically sourced recycled material — a calculus that increasingly favours the latter.

The FY 2026-27 Duty Landscape: What the Customs Tariff Actually Says

India’s Customs Tariff Act, 1975 — as amended through successive Finance Acts — classifies metal scrap under Chapter 72 (ferrous) and Chapters 74 to 81 (non-ferrous) of the First Schedule. The standard Basic Customs Duty (BCD) rate on ferrous scrap (HS 7204) is 2.5%. Stainless steel scrap (HS 7204.21 and 7204.29) and high-alloy scrap attract the same headline rate, though the effective rate mills actually pay is almost always lower, governed by time-bound CBIC notifications.

Non-ferrous scrap presents a more segmented picture. Copper scrap (HS 7404) carries a BCD of 2.5%; aluminium scrap (HS 7602) is at 2.5%; lead scrap (HS 7802) at 2.5%; and zinc scrap (HS 7902) at 2.5%. Nickel scrap (HS 7503) is at nil. The headline rates have been stable since the 2023-24 Budget, but the real lever — nil-duty Customs Notifications — can effectively zero out BCD for specific categories for specific periods, making those notifications, not the tariff schedule itself, the operative document for procurement planning.

The Ministry of Steel, Government of India has consistently advocated for concessional duty treatment on scrap imports to protect EAF-based secondary steel producers — which now account for roughly 35% of India’s total steel output — from the higher cost of primary iron ore routes. That policy logic remains intact into FY 2026-27, but it is now counterbalanced by the government’s parallel push to grow domestic scrap collection through the Steel Scrap Recycling Policy, 2019.

CBIC Notifications: How Nil-Duty Windows Work — and Expire

The Central Board of Indirect Taxes and Customs (CBIC) issues time-bound exemption notifications under Section 25 of the Customs Act, 1962. For ferrous scrap, the most consequential recent notification was Customs Notification No. 18/2021-Customs (as subsequently extended), which brought BCD on steel melting scrap and shredded scrap to nil. Extensions have been granted through the annual Finance Acts, and the most recent extension — covering the period through 31 March 2026 — was incorporated in the Finance Act 2025.

As of the date of publication (September 2026), the status of BCD on ferrous scrap for the remainder of FY 2026-27 is contingent on whether the Union Budget 2026-27, presented in February 2026, renewed the exemption. Mills that did not track this notification proactively and assumed continuity of nil duty faced an unwelcome surprise if the exemption lapsed even for a brief window — demurrage from delayed customs clearance while seeking legal clarity added ₹8–₹18 lakh per consignment in documented cases at Nhava Sheva and Mundra in FY 2025-26.

The lesson for procurement and finance teams is structural: nil-duty notifications for scrap are not permanent tariff reliefs. They must be tracked quarterly, and import contracts should contain price-adjustment clauses explicitly tied to the operative customs notification number at the date of bill of lading. Failure to include such clauses has been the single largest source of margin erosion for smaller secondary steel producers over the past three financial years.

BIS Quality Control Orders: The Port-Level Compliance Gate Nobody Budgeted For

The Bureau of Indian Standards Act, 2016 empowers the government to issue Quality Control Orders (QCOs) mandating BIS conformity certification for imported goods. In the scrap sector, QCOs have historically targeted finished steel, but the regulatory direction is unambiguous: BIS conformity requirements are being extended progressively to input materials, including imported scrap grades.

For mills importing under HS 7204 (ferrous scrap), the operative concern is the Steel and Steel Products (Quality Control) Order framework, which has been expanded through successive gazette notifications since 2022. An importer whose consignment does not carry a valid BIS Certificate of Conformity — or whose overseas supplier is not registered with the Bureau of Indian Standards — risks the consignment being held at the port of entry pending inspection. Clearance timelines in such cases have ranged from 14 to 45 days at major ports, based on industry reports from the first half of 2026.

The working capital cost of a 30-day port hold on a 5,000-tonne ferrous scrap consignment — assuming an average CIF value of ₹32,000 per tonne — is approximately ₹16 crore locked up in pending inventory, plus demurrage at ₹12–₹18 lakh per day for bulk carriers at Nhava Sheva. This is not a theoretical risk. Mills in Raipur and Hospet have reported QCO-related delays to industry bodies in both FY 2025-26 and early FY 2026-27. The compliance gate is real, and it is tightening.

What to Do Before the Consignment Ships

The critical action is pre-shipment conformity verification. Importers must confirm that their overseas supplier holds a valid BIS Foreign Manufacturers Certification Scheme (FMCS) licence for the specific scrap grade, and that the Bill of Lading references the correct HS code. A mismatch between the FMCS licence scope and the declared HS code is the most common trigger for port-level QCO holds. Customs brokers at major ports report that roughly one in six ferrous scrap consignments from certain origins now faces some form of documentation query on QCO compliance.

DGFT Licensing Under FTP 2023: Free, Restricted, and the Gaps Between

The Directorate General of Foreign Trade‘s Foreign Trade Policy 2023 (FTP 2023), which came into force on 1 April 2023 and operates into FY 2026-27, classifies goods at import in three categories: Free, Restricted, and Prohibited. For scrap importers, the critical classification sits at the HS code level, and minor variations in declared sub-heading can shift a consignment from ‘Free’ to ‘Restricted’ — triggering the requirement for a specific import licence from DGFT.

Most ferrous scrap under HS 7204 is classified as ‘Free’ for import under FTP 2023. However, certain non-ferrous scrap categories carry ‘Restricted’ classification, particularly where the material could qualify as hazardous waste under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 (HWM Rules, 2016). Under Rule 12 of the HWM Rules, 2016, import of hazardous waste for recycling requires prior informed consent and specific authorisation from the Ministry of Environment, Forest and Climate Change (MoEFCC) — a process that can take 60 to 90 days and effectively rules out spot purchases.

The practical implication: non-ferrous scrap importers — particularly those handling mixed copper, lead-acid battery scrap, or e-scrap fractions — must conduct a dual classification check. Does the material qualify as ‘scrap’ under FTP 2023, and does it simultaneously attract HWM Rules scrutiny as hazardous? The Ministry of Environment, Forest and Climate Change and DGFT do not always synchronise their classification frameworks, and the gap between them is where importers accumulate liability.

IGST, Customs Duty Rate Table, and the Working Capital Maths

Beyond BCD, every import attracts Integrated GST (IGST) under the IGST Act, 2017, applied on the assessable value plus BCD plus Social Welfare Surcharge (SWS, at 10% of BCD). For scrap, IGST is typically 18% — though specific classifications may qualify for 5% or 12% rates under the GST Council’s rate schedule. The SWS, though often overlooked in landed-cost calculations, adds a meaningful 0.25% effective burden even when BCD is at nil.

The table below summarises the operative duty structure for key metal scrap categories as applicable in FY 2026-27, assuming BCD at the standard tariff rate (nil-duty notifications, where operative, reduce BCD to 0%):

Scrap Category	HS Code	Standard BCD	IGST	SWS (on BCD)	Effective Total (std. BCD)
Steel Melting Scrap (HMS 1&2)	7204.10 / 7204.49	2.5%	18%	0.25%	~21.1%
Stainless Steel Scrap	7204.21	2.5%	18%	0.25%	~21.1%
Copper Scrap	7404.00	2.5%	18%	0.25%	~21.1%
Aluminium Scrap	7602.00	2.5%	18%	0.25%	~21.1%
Lead Scrap	7802.00	2.5%	18%	0.25%	~21.1%
Nickel Scrap	7503.00	Nil	18%	Nil	~18%
Steel Scrap (nil-duty notification operative)	7204 series	Nil	18%	Nil	~18%

The working capital impact of IGST is the aspect most frequently underestimated by first-time scrap importers. IGST paid at customs is creditable as Input Tax Credit (ITC) under the GST framework, but the credit cycle typically runs 30 to 60 days — during which the importer has effectively extended a zero-interest loan to the government. On a ₹50 crore consignment of ferrous scrap, that is ₹9 crore in IGST parked as receivable, stretching working capital for mid-sized mills with limited credit lines. Finance heads must model this as a liquidity cost, not a tax non-event.

The 7-Step Import Compliance Checklist for Scrap Buyers in FY 2026-27

The following checklist is designed for procurement, logistics, and finance teams at mills and trading houses. Each step corresponds to a specific regulatory requirement or commercial risk identified in this article.

1. Verify the operative CBIC Customs Notification number applicable to your scrap HS code at the date of the Bill of Lading — not the contract date. Confirm whether the nil-duty or concessional-duty window is live, and document the notification reference in your import file.
2. Confirm BIS-FMCS registration of the overseas supplier for the specific scrap grade being shipped. Obtain the FMCS licence copy before the consignment is loaded. A licence that covers a different sub-heading than the declared HS code is functionally useless at port.
3. Run a dual classification check under FTP 2023 and HWM Rules, 2016 for any non-ferrous or mixed-fraction scrap. If the material falls within the hazardous waste schedule, initiate the MoEFCC prior-informed-consent process a minimum of 90 days before intended shipment.
4. Insert a customs-notification price-adjustment clause in all import contracts. The clause should specify that the contract price adjusts to reflect the effective BCD rate as per the notification operative on the Bill of Lading date — not the rate assumed at contract signing.
5. Pre-calculate IGST working capital cost as a separate line in the landed-cost model. Assume a 45-day ITC credit cycle and a borrowing cost of 9.5% per annum (approximate MCLR-linked rate for mid-tier borrowers in Q2 FY 2026-27) to arrive at a true liquidity cost.
6. Appoint a customs broker with documented scrap-sector experience at the specific port of import. Port-specific QCO interpretation varies; brokers at Nhava Sheva are not necessarily current on Mundra or Vishakhapatnam practice.
7. Maintain a vendor alternative in domestic recycled scrap — sourced from CPCB-authorised processors — for the 10–15% of your monthly requirement that can pivot without contractual penalty. This acts as a natural hedge against both duty-rate changes and port-hold scenarios.

Domestic Recycled Scrap as a Structural Alternative: Pricing the Trade-Off

The Steel Scrap Recycling Policy, 2019 — notified by the Ministry of Steel — set an explicit target of 300 million tonnes per annum of organised scrap collection by 2030, compared to an estimated 25–30 million tonnes collected in an organised manner as of 2022. The policy created the framework for vehicle scrapping centres, collection aggregators, and quality grading standards. As of FY 2025-26, progress has been steady if not spectacular: the Vehicle Scrapping Policy, operationalised through the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021, has brought a growing number of Registered Vehicle Scrapping Facilities (RVSFs) into the organised supply chain.

The practical implication for mills is a gradually thickening domestic supply base for ferrous scrap. Domestic ferrous scrap sourced through authorised recyclers avoids BCD, IGST at import stage, QCO clearance risk, port demurrage, and foreign-exchange exposure entirely. In Q1 FY 2026-27, HMS-grade domestic ferrous scrap was trading at approximately ₹34–₹39 per kg across Mumbai, Pune, and Ahmedabad yards — compared to a CIF-landed cost (inclusive of 18% IGST at nil BCD) of ₹36–₹42 per kg for imported HMS-1 from the US and EU origins. The gap has narrowed to the point where total landed cost now frequently favours domestic sourcing once port logistics, broker fees, and IGST working capital cost are included in the model.

Non-ferrous is a more nuanced picture. Copper scrap — where India is structurally import-dependent for secondary refinery feed — still shows a quality-adjusted price advantage for certain imported grades. But for aluminium and lead, domestic recycled supply from the automotive and industrial sectors is competitively priced and often logistically simpler. Our scrap purchasing programme covers both ferrous and non-ferrous categories across pan-India locations, and we maintain LME-benchmarked pricing that gives procurement teams a transparent basis for domestic versus import comparisons.

The regulatory direction reinforces the commercial case. The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 continue to tighten the permissible import of secondary materials that could be characterised as waste. CPCB’s enforcement of HWM Rules at the importer level has intensified since 2024, with authorisation requirements becoming stricter for non-ferrous fractions. Domestic recycled scrap processed by CPCB-authorised facilities sidesteps this risk category entirely and — critically — comes with GST-compliant invoicing and a certificate of recycling that supports BRSR-grade ESG disclosures for listed entities.

Related Articles

• BIS Standards for Recycled Materials: What’s Notified, What’s Coming, What It Means for Buyers
• Election-Year Policy Risk: How a Change in Government Could Reshape India’s Recycling Rules
• How to Set Up a Defensible Hazardous Waste SOP in 30 Days

Frequently Asked Questions

What is the current Basic Customs Duty rate on ferrous scrap imports in India?

The standard BCD rate under the Customs Tariff Act, 1975 for ferrous scrap (HS 7204) is 2.5%. However, CBIC has periodically issued nil-duty exemption notifications — most recently extended through the Finance Act 2025 covering the period to 31 March 2026. Whether a nil-duty notification is operative for FY 2026-27 must be verified against the specific CBIC Customs Notification number current at the date of your Bill of Lading. Do not assume continuity; check the notification status each quarter.

Do imported scrap consignments require BIS certification in India?

Increasingly, yes. The Bureau of Indian Standards Act, 2016 empowers Quality Control Orders that mandate BIS conformity for imported materials. For ferrous scrap, importers should confirm whether their overseas supplier holds a valid BIS Foreign Manufacturers Certification Scheme (FMCS) licence for the specific HS sub-heading being imported. A mismatch between the FMCS licence scope and the declared HS code is the most common trigger for port-level holds, which in documented cases have added 14 to 45 days of clearance delay and demurrage exceeding ₹15 lakh per vessel.

How does DGFT’s Foreign Trade Policy 2023 affect scrap imports?

FTP 2023, operative from 1 April 2023 into FY 2026-27, classifies most ferrous scrap (HS 7204) as ‘Free’ for import. Certain non-ferrous scrap categories are ‘Restricted’ where they may simultaneously qualify as hazardous waste under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. Under Rule 12 of those Rules, importing hazardous waste for recycling requires prior informed consent from MoEFCC — a 60 to 90-day process. Importers of mixed non-ferrous fractions must run a dual classification check before contracting.

Can IGST paid on scrap imports be claimed as Input Tax Credit?

Yes. IGST paid at customs on scrap imports is fully creditable as Input Tax Credit under the IGST Act, 2017, provided the import is for business purposes and the importer holds a valid GSTIN. The credit appears in GSTR-2B typically within 30 to 60 days of the Bill of Entry being filed. Finance teams must model this 30–60 day credit gap as a working capital cost — on a ₹50 crore consignment carrying 18% IGST, that is ₹9 crore parked as a receivable, with an implied liquidity cost at current MCLR-linked rates of approximately ₹35–₹40 lakh for the credit cycle period.

Is domestic recycled scrap a viable alternative to imported scrap for Indian steel mills in 2026?

For EAF-based mills in ferrous, domestic recycled scrap has closed the price gap materially. In Q1 FY 2026-27, HMS-grade domestic scrap traded at ₹34–₹39 per kg in Mumbai and Ahmedabad yards, against a CIF-landed cost of ₹36–₹42 per kg for imported HMS-1 at nil BCD plus IGST. Once port logistics, broker fees, and IGST working capital cost are included, domestic sourcing frequently offers a lower total landed cost — with the additional advantage of zero QCO risk and GST-compliant documentation for BRSR disclosures. The Steel Scrap Recycling Policy, 2019 is progressively strengthening domestic supply infrastructure to support this substitution.

Work With The National Recycling Corporation

The National Recycling Corporation is a Mumbai-headquartered, pan-India scrap trading and recycling company that works directly with steel mills, foundries, non-ferrous refiners, and industrial manufacturers across Maharashtra, Gujarat, Telangana, Tamil Nadu, Karnataka and beyond. Our supply chain is built to give procurement teams a credible domestic alternative to imported scrap — without the customs, QCO, and working capital complexity that imported consignments increasingly carry.

Every tonne of scrap we supply comes with a GST-compliant tax invoice, LME-benchmarked pricing transparency, and — where required — a certificate of recycling or destruction that satisfies BRSR-grade ESG documentation requirements for listed entities. Our disposal and recycling partners operate under CPCB authorisation, ensuring that both the material and the chain-of-custody meet regulatory standards under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 and applicable State Pollution Control Board (SPCB) requirements.

Whether you are a finance head benchmarking import duty exposure, a procurement lead seeking a reliable domestic HMS-grade supply, or a sustainability manager building a defensible scrap-disposal audit trail, contact us to discuss your specific requirements. We also support non-ferrous scrap categories — our ferrous and non-ferrous metal recycling service covers copper, aluminium, brass, stainless steel and lead — as well as full-service industrial waste management for complex multi-stream generators.

• Pan-India pickup and logistics — no minimum tonnage for regular mill clients
• LME-indexed pricing updated weekly for copper, aluminium and lead scrap categories
• GST-compliant invoicing with full HSN code disclosure
• Certificate of recycling / destruction for BRSR and internal ESG reporting
• CPCB-authorised disposal partners for hazardous fractions requiring regulated processing
• Dedicated account manager for mills above 200 tonnes per month

Sources and References

• Ministry of Steel — Steel Scrap Recycling Policy, 2019 (official document)
• CBIC — Customs Act, 1962 and Customs Tariff Act, 1975 (Section 25 exemption notifications)
• DGFT — Foreign Trade Policy 2023 (operative text and ITC-HS classification)
• CPCB — Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016
• Bureau of Indian Standards — Foreign Manufacturers Certification Scheme (FMCS)
• Ministry of Environment, Forest and Climate Change — Regulatory notifications and HWM Rules administration
• GST Council / GSTN — HSN classification and IGST rate schedule for scrap categories
• London Metal Exchange — Ferrous scrap and non-ferrous metals pricing benchmarks