Central Board of Indirect Taxes & Customs (CBIC) had issued a Circular No. 265/11/2026-GST dated 28th October 2026 clarifying on various issues pertaining to goods classification, rate of tax and Input Tax Credit (ITC) for four categories of goods.
The clarification has been made based on recommendations of the 57th meeting of the GST Council which was held on 8th October 2026. The four items of goods mentioned above are Sublimation Paper, Toys, Second-hand Motor Vehicle and Seaweed Extract Bio-stimulants. With these changes, efforts have been made to avoid confusions in the classification and provide better certainty in the implementation of GST in businesses.
1. GST on Sublimation Paper: 18%
CBIC clarifies that sublimation paper covered under Heading 4809 of the Customs Tariff Act, 1975 to be taxed @ 18% GST. This clarification settles the confusion as to its classification either under Heading 4809 or Sub-heading 4810 22. Further, GST Council recommended to regularize all past classification and rate issues on “as is where is” basis.
2. GST Rates on Toys: All Categories Covered
CBIC has come clear about the scope of GST rate entries applicable for toys. They cover all the types under Heading 9503. These are not restricted to just tricycle, scooter and pedal cars.
These covers:
- Dolls and dolls’ carriages
- Other recreational toys
- Scale models in miniature form whether working or not
- All types of puzzles
The following are the applicable GST rates on toys:
| Toy Category | GST Rate |
| Non-electronic toys | 5% |
| Electronic toys | 18% |
This clarification has resolved the ambiguity in classification of different types of toys. Now the business can apply the relevant rates as per classification of the product. The new GST Rates on Toys and Used Cars bring more clarity for manufacturers, retailers and dealers.
3. GST Input Tax Credit on Used Cars: Major Relief for Dealers
This new clarification from CBIC regarding the suitability of ITC for Second Hand Vehicle Dealers (GST Margin Scheme) was a concern area for businesses as they were confused about the restriction on ITC. The confusion was whether only the ITC restriction is only for the purchased used vehicle or any business expenses.
Now CBIC has cleared this doubt and clarified that the restriction is only on GST paid on the purchase of second-hand vehicles. So, the eligible ITC is available on other business expenses like:
- Spare parts and components
- Service for repair and maintenance
- Technology & Software services
- Business Rent
- Marketing and Advertising service
But one has to meet the other necessary conditions as per the CGST Act, 2017.
Example: Let’s say used car dealers cannot take ITC on GST paid for the purchase of a second-hand vehicle under the margin scheme. However, can take eligible ITC on repair services and spare parts. This helps GST Input Tax Credit on Used Cars be practical.
4. GST on Seaweed Extract-Based Bio-Stimulants
As per the clarification issued by CBIC, the bio-stimulants registered under Schedule VI of the Fertilizer (Inorganic, Organic or Mixed) (Control) Order, 1985 made of Sea Weed extract are qualified as fertilizers under Heading 3101 and taxable at 5% GST. This clarification is to differentiate the same from the Plant Growth Regulator which is classified under Heading 3808.
Also, as recommended by the GST Council, the past dispute on classification issues can be regularized on “as is where is” basis. However, the clarification is available only to the bio-stimulants that meet the requirement of GST Registration as stipulated.
5. Key Compliance Takeaways for Businesses
Business involved in the trade of such products should take the following actions:
- Check the classification of products and respective GST rates
- Make changes in billing and accounting systems
- Check availability of ITC for expenses incurred in the used vehicle business
- Keep correct invoices and documents
- Check pending cases related to classification issues
Also, businesses need to ensure correct GST Return Filing and timely GST Registration, wherever applicable. Business can take help of professional GST Advisory & Consultancy to understand this circular and make the changes to the compliances as per the circular. Proper GST Return Filing and proper documentation will help reduce errors in reporting.
Conclusion
CBIC circular no. 265/11/2026-GST is a very important update on GST rate, product classification & ITC. The new GST Rates on Toys and Used Cars, clarification for sublimation paper and bio-stimulants will help businesses to have a consistent approach towards tax compliances. Businesses should review current compliance processes and get proper GST Advisory & Consultancy to resolve their issues with product classification and ITC.
FAQs
Q1. What is the rate of GST for electronic and non-electronic toys?
The rate of GST for non-electronic toys (under Heading 9503) is 5% whereas in case of electronic toys, it is 18%.
Q2. Is ITC available to used car dealers for repairing?
Yes. Subject to compliance of conditions under CGST Act, ITC will be available on repairs, spare parts and other business inputs and input services (if any).
Q3. What is the rate of GST on Sublimation paper?
The Sublimation paper is classified under Heading 4809 and has a GST rate of 18%.
Q4. Which seaweed-based bio-stimulants are eligible for 5% GST?
The seaweed extract-based bio-stimulants registered under Schedule VI of Fertilizer Control Order, 1985 will be eligible for classification under Heading 3101 and will be subject to GST rate of 5%.
Moreover, if you want any other guidance relating to latest gst update and gst return , please feel free to talk to our business advisors at 8881-069-069.
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