GST on Goods: Toys, Used Vehicles and Classification Clarifications vide Circular No. 265/11/2026-GST

The Central Board of Indirect Taxes and Customs (CBIC), through its Tax Research Unit, has issued Circular No. 265/11/2026-GST dated 28 October 2026.

Based on recommendations of the 57th GST Council meeting held on 8 October 2026, the circular clarifies the classification and GST treatment of sublimation paper, toys, inputs and services used by second-hand vehicle suppliers, and sea-weed extract based bio-stimulants.

1. GST Classification and Rate on Sublimation Paper

Representations sought clarification on whether sublimation paper should be classified under heading 4809 or subheading 4810 22.

The circular clarifies that sublimation paper falls under heading 4809 and attracts 18% GST. (Serial No. 176 of Schedule II to Notification No. 09/2025-Central Tax (Rate), dated 17 September 2025)

For past disputes concerning its classification and applicable rate, the circular records the GST Council’s recommendation to regularize the past period on an “as is where is” basis. (Paragraph 1.3)

The circular does not specify a separate date range for that past-period recommendation.

2. GST on Toys: Entries Cover More Than Wheeled Toys

The circular addresses whether the relevant toy entries are restricted to the expressly listed examples, such as tricycles, scooters, and pedal cars.

It clarifies that the entries are not limited to those examples or similar wheeled toys. The expression “etc.” covers other categories of toys within the corresponding heading 9503.

The categories identified include:

• Dolls’ carriages;

• Dolls;

• Other toys;

• Reduced-size or scale models;

• Similar recreational models, whether working or not; and

• Puzzles of all kinds.

(Paragraph 2.4)

Non-electronic and electronic toys

The circular reproduces the following distinction:

The named examples do not restrict the scope of the corresponding entries. Classification within heading 9503 and the distinction between electronic and other toys remain relevant. (Serial No. 497 of Schedule I and Serial No. 616 of Schedule II to Notification No. 09/2025-Central Tax (Rate))

3. Used Vehicle Margin Scheme: ITC on Other Inputs and Services

Suppliers of old and used motor vehicles sought clarification on the scope of the non-availment-of-ITC condition under the specified margin-scheme notifications.

The question was whether the restriction applies only to the purchased second-hand vehicles or also to other inputs and services used in the business.

Restriction applies to the procured second-hand vehicle

The circular clarifies that the restriction applies only to tax paid on the procured old and used motor vehicles.

It does not extend, under those notifications, to other inputs and input services used in the business. (Paragraph 3.2)

ITC on business inputs and services

Suppliers covered by the identified margin-scheme notifications may avail credit on other inputs and input services, subject to the CGST Act.

The circular specifically identifies:

• Spares;

• Repair and maintenance services;

• Technology services;

• Rent; and

• Marketing and advertisement services.

The availability remains subject to the applicable statutory conditions. (Notification Nos. 08/2018-Central Tax (Rate), 09/2018-Integrated Tax (Rate), and 01/2018-Compensation Cess (Rate), dated 25 January 2018)

4. Classification of Sea-Weed Extract Based Bio-Stimulants

The circular addresses whether sea-weed extract based bio-stimulants should be classified as fertilizers under heading 3101 or as plant-growth regulators under heading 3808.

It clarifies that these products are classifiable under heading 3101 where they are registered under Schedule VI of the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985. (Paragraph 4.2)

The registration condition is an essential part of the clarification.

The circular records that the recommendation has been implemented by inserting an explanation in the relevant entry. (Serial No. 237 of Schedule I to Notification No. 09/2025-Central Tax (Rate), dated 17 September 2025)

Past classification disputes

For past disputes concerning the classification of these bio-stimulants, the circular records the GST Council’s recommendation to regularize the past period on an “as is where is” basis. (Paragraph 4.3)

Conclusion

Circular No. 265/11/2026-GST clarifies the classification of sublimation paper and eligible sea-weed bio-stimulants, confirms the wider scope of the toy entries, and explains that the margin-scheme ITC restriction concerns the procured second-hand vehicle rather than all other business inputs and services. The stated classifications, conditions, and statutory qualifications remain important when applying each clarification.

To read the complete clarification and access the original circular, refer to Circular No. 265/11/2026-GST dated 28 October 2026: 

https://taxinformation.cbic.gov.in/view-pdf/1003357/ENG/Circulars

Disclaimer : This article is for informational purposes only and should not be construed as legal or professional advice. Taxpayers should consult their tax advisor based on the facts of their specific case before taking any action.