Summary
The CBIC (Tax Research Unit) has issued Circular No. 265/11/2026-GST dated 28.10.2026 under Section 168(1) of the CGST Act. Based on the recommendations of the 57th GST Council meeting held on 8 October 2026, it clarifies the classification and GST rate of four items. For two of them, past disputes are settled on an “as is where is” basis.
At a Glance
| Item | Clarification | Past period |
|---|---|---|
| Sublimation paper | Heading 4809, GST 18% | Regularised “as is where is” |
| Toys (heading 9503) | All toys of heading 9503 are covered: 5% (non-electronic) / 18% (electronic) | — |
| Used car dealers under margin scheme | ITC allowed on spares, repairs, rent, marketing, technology services etc. Blocked only on the used vehicle itself. | — |
| Seaweed extract based bio-stimulants | Heading 3101 (fertilisers), if registered under Schedule VI of the Fertiliser Control Order | Regularised “as is where is” |
1. Sublimation Paper — 18% under Heading 4809
There was a dispute on whether sublimation paper (used for heat-transfer printing on fabrics, mugs and similar items) falls under heading 4809 or sub-heading 4810 22. The circular clarifies that it is classifiable under heading 4809 and attracts 18% GST under S. No. 176 of Schedule II of Notification No. 09/2025-Central Tax (Rate) dated 17.09.2025.
For past disputes, the Council has recommended that the past period be regularised on an “as is where is” basis. In simple terms, tax already paid for the past at the rate the supplier applied is generally accepted as it is, without fresh demands or refunds on this classification issue.
2. Toys — All of Heading 9503 Covered
Notification No. 09/2025-CTR has two entries for toys:
- S. No. 497 of Schedule I (5%): “Toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof) [other than electronic toys]”
- S. No. 616 of Schedule II (18%): “Electronic toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof)”
Some field offices were reading these entries narrowly, as if they covered only wheeled toys. The circular clarifies that “etc.” covers all toys of heading 9503, including dolls’ carriages, dolls, other toys, reduced-size (“scale”) models and similar recreational models (working or not), and puzzles of all kinds.
| Type of toy (heading 9503) | GST |
|---|---|
| Non-electronic, e.g. dolls, puzzles, scale models, tricycles | 5% |
| Electronic toys | 18% |
3. Margin Scheme for Used Vehicles — ITC on Other Inputs Allowed
Dealers in old and used motor vehicles can pay GST and Compensation Cess at concessional rates on their margin under Notifications No. 08/2018-CTR, 09/2018-ITR and 01/2018-Compensation Cess (Rate) dated 25.01.2018. These notifications carry a condition that ITC is not availed. The question was whether this bar covers all business expenses or only the vehicle.
The circular clarifies that the ITC restriction applies only to tax paid on the second-hand vehicles procured. The dealer can claim ITC, subject to the CGST Act, on other inputs and input services, such as:
- spares and parts;
- repair and maintenance services;
- technology services;
- rent;
- marketing and advertisement services.
This formalises the 57th Council recommendation. Used-car dealers should review the ITC they left unclaimed on such expenses, keeping in mind the Section 16(4) time limit.
4. Seaweed Extract Based Bio-Stimulants — Fertilisers (3101)
The dispute was whether these products are fertilisers under heading 3101 or plant-growth regulators under heading 3808. The circular clarifies that seaweed extract based bio-stimulants registered under Schedule VI of the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985 are classifiable under heading 3101, under S. No. 237 of Schedule I of Notification No. 09/2025-CTR. An explanation has been inserted in that entry to give effect to this. Past disputes are regularised on an “as is where is” basis.
Checklist for Businesses
- Sublimation paper: charge 18% under 4809 from now on. For pending notices on the past rate, rely on the “as is where is” regularisation.
- Toy makers and sellers: check the HSN and rate in your billing software. Non-electronic toys of 9503 at 5%, electronic toys at 18%. Respond to any narrow-reading objection with this circular.
- Used-car dealers: claim ITC on spares, repairs, rent, marketing and similar expenses. Do not claim ITC on the used vehicles bought under the margin scheme.
- Bio-stimulant manufacturers: keep the Schedule VI FCO registration on record. Only registered products get the 3101 classification.
Related
Reference: Circular No. 265/11/2026-GST dated 28.10.2026 (TRU); Notification No. 09/2025-Central Tax (Rate) dated 17.09.2025; Notifications No. 08/2018-CTR, 09/2018-ITR and 01/2018-Compensation Cess (Rate) dated 25.01.2018; 57th GST Council meeting, 08.10.2026. This page is for general information only.
Official CBIC circular
Circular No. 265/11/2026-GST