GST Circulars 265 and 266: Toys, Sublimation Paper, Used Cars, Bio-Stimulants and NBFC Co-Lending
CBIC Circulars 265/11/2026 and 266/12/2026 (28 October 2026): GST on sublimation paper, toys, used car ITC under the margin scheme, seaweed bio-stimulants and specific service issues.
GST Circular 265/11/2026 and Circular 266/12/2026, both dated 28 October 2026, settle several classification, rate and credit questions after the 57th GST Council meeting. Circular 265 deals with goods: sublimation paper, toys, used motor vehicles under the margin scheme, and seaweed-based bio-stimulants. Circular 266 deals with specific services issues. This guide explains both in plain language.
| Circular | Date | Main subject |
|---|---|---|
| 265/11/2026-GST | 28 October 2026 | Sublimation paper, scope of toy entries, ITC for used vehicle dealers under the margin scheme, seaweed extract bio-stimulants |
| 266/12/2026-GST | 28 October 2026 | R&D grant certification, shipping services from related persons, ancillary recoveries in motor vehicle leasing, TRAI status, interest on bank FTP, NBFC and bank co-lending |
Circular 265/11/2026-GST: GST on Goods
1. Sublimation paper: heading 4809, 18% GST
Representations asked whether sublimation paper falls under heading 4809 or sub-heading 4810 22 of the Customs Tariff. The circular clarifies that it is classifiable under heading 4809 and attracts 18% GST. Past disputes on classification and rate are to be regularised on an “as is where is” basis, as stated in the circular.
2. Toys: entries are not limited to wheeled toys
Some officers had read the toy entries as covering only tricycles, scooters, pedal cars and similar wheeled toys. The circular clarifies that the entries in Schedule I (S. No. 497) and Schedule II (S. No. 616) of Notification No. 09/2025-Central Tax (Rate) are not restricted to those toys. They cover other toys classified under heading 9503, such as dolls, scale models and puzzles.
| Type of toy | GST rate |
|---|---|
| Non-electronic toys covered by the entry (heading 9503) | 5% |
| Electronic toys covered by the entry | 18% |
3. Used motor vehicles under the margin scheme: ITC restriction
Dealers in second-hand cars who pay GST only on their margin cannot claim ITC on the tax paid on buying the used vehicle itself. The circular clarifies that this restriction applies to the tax on that purchased vehicle. ITC on other inputs and input services, such as spares, repairs and other services used in the business, is not blocked by the margin scheme restriction and remains subject to the normal conditions of the CGST Act. If you deal in used cars, check how the circular applies to your purchases.
4. Seaweed extract-based bio-stimulants: heading 3101
Seaweed-extract-based bio-stimulants that are registered under Schedule VI of the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985 are classifiable under heading 3101, and are treated as fertiliser. Past classification disputes are regularised on an “as is where is” basis.
Circular 266/12/2026-GST: GST on Services
Circular 266 clarifies several points on services. We list the issues so you can check whether any of them touches your business, and then read that part of the circular in full:
- certification relating to research and development (R&D) grants
- specified shipping services provided by related persons
- valuation of ancillary recoveries in motor vehicle leasing
- status of TRAI for GST purposes
- interest on bank funds transfer pricing (FTP)
- co-lending arrangements between NBFCs and banks
We have not summarised the detailed position on each of these services issues. They are specific to the transaction, so rely on the circular text and your adviser for your case.
What Businesses Should Do
- Paper and printing businesses: check that sublimation paper is billed at 18% under heading 4809.
- Toy sellers and importers: review your classification and rates, 5% for non-electronic and 18% for electronic toys under the covered entries.
- Used car dealers: separate the purchase of the vehicle, where ITC is restricted, from spares, repairs and other business costs, where ITC remains subject to the Act.
- Agri-input suppliers: confirm that seaweed bio-stimulants carry the Fertiliser Control Order registration to be classified under heading 3101.
- NBFCs, banks, lessors and shippers: read the relevant Circular 266 paragraph for your transaction.
Nature of These Circulars
Both circulars are clarifications under Section 168(1) of the CGST Act, 2017. They guide officers, but they do not change the Act, the margin scheme notification or the rate schedules.
Official Documents
- CBIC Tax Information Portal: GST Circulars – search for Circulars 265/11/2026-GST and 266/12/2026-GST dated 28 October 2026
Frequently Asked Questions
What is the GST rate on sublimation paper?
18%, under heading 4809, according to Circular 265/11/2026-GST.
Do toys other than tricycles and scooters get the 5% rate?
The circular says the toy entries are not limited to wheeled toys and cover other heading 9503 toys. The rate is 5% for covered non-electronic toys and 18% for electronic toys.
Can used car dealers claim ITC on repairs and spares?
The circular clarifies that the margin scheme restriction applies to tax paid on buying the second-hand vehicle itself. ITC on other inputs and input services remains subject to the CGST Act.
Under which heading are seaweed bio-stimulants classified?
Heading 3101, when registered under Schedule VI of the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985.
Related Updates
- 57th GST Council meeting recommendations
- Circular 258: show cause notices, adjudication and appeals
- Circular 264: Rule 96(10) omission applies retrospectively
- GST changes from 1 November 2026
Source: CBIC Circulars No. 265/11/2026-GST and 266/12/2026-GST dated 28 October 2026, as reported by tax news sites. This article is a plain-language summary for general information. Please read the official circulars before acting.
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