CBIC Clarifies GST on Sublimation Paper, Toys, Used Vehicles and Bio-Stimulants

The Central Board of Indirect Taxes and Customs (CBIC), vide Circular No. 265/11/2026-GST dated 28 October 2026, has clarified the GST classification and tax treatment of certain goods following the recommendations of the 57th GST Council meeting held on 8 October 2026. These clarifications aim to resolve classification disputes, promote uniform tax treatment and provide greater certainty to businesses and taxpayers.

1. Sublimation Paper: 18% GST Under Heading 4809

CBIC has clarified that sublimation paper is classifiable under heading 4809 of the Customs Tariff Act, 1975, attracting GST at 18%.

Previously, disputes arose over whether sublimation paper should be classified under heading 4809 or sub-heading 4810 22. The clarification resolves this classification ambiguity.

Key points:

• Classification: Heading 4809.

• GST rate: 18%.

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• Relevant reference: Serial No. 176 of Schedule II to Notification No. 09/2025-Central Tax (Rate), dated 17 September 2025.

• Past disputes concerning classification and GST rates are to be regularised on an “as is where is” basis.

Businesses dealing in sublimation paper should review their past tax positions and assess the implications of the clarification.

2. Toys: GST Rates of 5% and 18%

CBIC has clarified that the GST rate entries covering toys are not restricted to tricycles, scooters and pedal cars. They extend to all other categories of toys falling under heading 9503 of the Customs Tariff Act, 1975.

The applicable rates are:

• Non-electronic toys: 5% GST under Serial No. 497 of Schedule I.

• Electronic toys: 18% GST under Serial No. 616 of Schedule II.

These entries form part of Notification No. 09/2025-Central Tax (Rate), dated 17 September 2025.

The clarification covers other toys under heading 9503, including dolls, dolls’ carriages, scale models, recreational models and puzzles of all kinds.

Manufacturers, importers, distributors and retailers should review their product classifications and ensure that the applicable GST rate is determined according to the relevant tariff heading and notification entry.

3. Used Vehicle Dealers: Clarification on Input Tax Credit

The circular provides important clarity for dealers supplying old and used motor vehicles under the GST margin scheme.

The restriction on input tax credit (ITC) does not extend to every input and input service used in the business. Instead, it applies to the tax paid on the procurement of the second-hand vehicles themselves when the dealer seeks the benefit of the concessional margin scheme.

Accordingly, dealers may avail ITC on eligible business inputs and input services, subject to the applicable provisions of the CGST Act, 2017.

Examples include:

• Spare parts and other eligible inputs.

• Repair and maintenance services.

• Technology-related services.

• Rent.

• Marketing and advertising services.

The relevant framework includes Notification No. 08/2018-Central Tax (Rate), Notification No. 09/2018-Integrated Tax (Rate) and Notification No. 01/2018-Compensation Cess (Rate), all dated 25 January 2018.

Dealers should review their ITC accounting and distinguish tax paid on vehicle purchases from tax incurred on other eligible business expenses.

4. Seaweed-Extract-Based Bio-Stimulants: Classification Under Heading 3101

CBIC has clarified the classification of specified seaweed-extract-based bio-stimulants that are registered under Schedule VI to the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985.

Such products are classifiable under heading 3101 as fertilisers, rather than under heading 3808 as plant-growth regulators.

The relevant reference is Serial No. 237 of Schedule I to Notification No. 09/2025-Central Tax (Rate), dated 17 September 2025. The applicable central tax rate under this entry is 2.5%, corresponding to an aggregate GST rate of 5% for intra-State supplies, subject to the applicable rate notification.

Importantly, the clarification does not cover every seaweed-extract-based product. Eligibility for this classification depends on the specified registration requirements and the nature of the product. Products containing plant growth regulators may require separate examination.

Past classification disputes concerning the specified bio-stimulants are to be regularised on an “as is where is” basis.

Conclusion: Review GST Classification and ITC Positions

CBIC Circular No. 265/11/2026-GST dated 28 October 2026 provides greater clarity on four important areas of GST compliance. The clarifications address sublimation paper classification, the scope of toy rate entries, ITC eligibility for used vehicle dealers and the classification of specified seaweed-extract-based bio-stimulants.

Businesses should review their product classifications, tax invoices, applicable GST rates and ITC records in light of these clarifications. Where past-period transactions are involved, the implications of regularisation on an “as is where is” basis should be evaluated carefully.

For expert guidance on this topic, contact your tax professional today.