From 1 June 2026, the Federation of Indian Mineral Industries (FIMI), in alignment with Bureau of Indian Standards (BIS) and Ministry of Steel guidance, has introduced tighter classification protocols for scrap metal feedstock. Steel re-rollers, foundries, and metal-processing units across India must now verify supplier compliance with the new grading taxonomy before accepting bulk purchases.
The change affects raw-material invoicing, input costing, and GST classification for many processors—a silent but material shift in the cost structure that most suppliers have not yet communicated to their customers.
Advisory
The June 2026 FIMI circular redefines 'Grade A', 'Grade B' and 'Grade C' metal scrap by chemical composition and dimensional tolerance, not visual sorting alone. Suppliers are now required to issue certificates; many small and mid-tier scrap dealers lack testing labs, creating a supply-side squeeze and upward price pressure on input materials.
Invoices for scrap metal lacking the new grade certificate carry reduced or disputed ITC eligibility under GST. GST authorities are cross-checking scrap purchases against FIMI registry; processors buying from unlicensed or non-compliant dealers risk audit notice and credit reversal.
Stricter scrap grading typically improves melt yield and reduces slag loss, but the cost of certified material outpaces historical savings. Processors must recalculate the finished-goods cost base and adjust pricing strategy to protect margin on fixed-price contracts signed before June 2026.
Under the new FIMI protocol, metal and steel processors must now verify that scrap suppliers hold certification under the revised grading standard before accepting delivery. The Ministry of Steel, via its Scrap Management Division, is monitoring compliance via spot audits at major re-rolling units and foundries. GST Input Tax Credit for scrap purchases is now contingent on the invoice carrying a valid FIMI-compliant grade certificate; non-certified purchases may trigger credit denial under Section 16 of the CGST Act. Vinayakam Consultants helps manufacturers audit their current scrap supplier contracts, flag pricing gaps, and restructure purchase agreements to ensure both ITC protection and margin stability across the transition.
Your action checklist
- Obtain and review the FIMI Circular No. 04/2026 (issued 15 May 2026); cross-check your current scrap suppliers against the FIMI registry of certified graders at fimi.in.
- Request grade certificates and test reports from all active scrap suppliers; flag any supplier unable to provide FIMI-compliant documentation and plan replacement or phased transition.
- Recalculate raw-material cost per unit (per tonne of finished steel, per melt, or per casting) using the new certified scrap price; model impact on gross margin and identify price points at which to trigger a customer price review.
- Instruct your accounts team to reject invoices without a FIMI grade certificate and flag them in the GST audit log; confirm with your auditor that ITC on non-certified purchases will be reversed and plan remediation.
Frequently asked questions
From 1 June 2026, FIMI has introduced tighter classification protocols redefining Grade A, B, and C metal scrap by chemical composition and dimensional tolerance. Suppliers must now issue grade certificates; processors must verify supplier compliance before accepting bulk purchases.
Invoices for non-compliant scrap metal without proper grade certificates face reduced ITC eligibility. GST authorities cross-check purchases against FIMI registry; non-compliance risks audit notices and credit reversal.
Verify that all scrap suppliers hold FIMI certification, recalculate finished-goods cost bases accounting for certified material premiums, and review invoicing procedures to ensure grade certificates are obtained before purchase to maintain GST ITC eligibility.