Table of Contents
Table of Contents
Last updated: 29 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
Classification disputes rarely make headlines, but they decide the actual GST rate a supplier charges – and four such disputes, flagged at the GST Council’s 57th meeting on 8 October 2026, are now settled by Circular No. 265/11/2026-GST, dated 28 October 2026.
New to terms such as “margin scheme” or “as is where is”? See the technical terms explained in simple words further down.
The dispute was whether sublimation paper falls under heading 4809 or sub-heading 4810 22 of the Customs Tariff Act, 1975 – a distinction that affects both classification and rate. The circular clarifies it is classifiable under heading 4809, attracting 18% GST (S.No. 176 of Schedule II of notification No. 09/2025-C.T.R. dated 17.09.2025).
Past period regularised: the Council has recommended regularising the earlier period on an “as is where is” basis – so GST already paid under either interpretation for periods before this clarification is not reopened.
The question here was whether the toy rate entries in notification No. 09/2025-C.T.R. apply only to the specific examples named – tricycles, scooters, pedal cars – or to the broader category of toys under heading 9503.
| Entry | Coverage | GST rate |
|---|---|---|
| S.No. 497, Schedule I | Toys like tricycles, scooters, pedal cars, etc. (excluding electronic toys) | 5% |
| S.No. 616, Schedule II | Electronic toys like tricycles, scooters, pedal cars, etc. | 18% |
Some field formations had read these entries restrictively, excluding toys not expressly named – creating inconsistent treatment across the trade. The circular clarifies that the word “etc.” is not limited to wheeled toys: it extends to all other toys falling under heading 9503, including dolls’ carriages, dolls, other toys, reduced-size (“scale”) models and similar recreational models (working or not), and puzzles of all kinds.
Under the margin scheme notifications (Notification No. 08/2018-C.T.R., Notification No. 09/2018-I.T.R., and Notification No. 01/2018-Compensation Cess (Rate), all dated 25.01.2018), a dealer gets a concessional GST/Compensation Cess rate on the supply of old and used motor vehicles, conditional on not availing ITC. The question was whether this no-ITC condition extends to every input and input service the dealer uses in that business, or only to the vehicle itself.
The circular clarifies the condition is narrow: it blocks ITC only on the tax paid on the procured second-hand vehicle. Dealers remain free to avail ITC on other inputs and input services used in the business – spares, repair and maintenance services, technology services, rent, marketing and advertisement services, and the like – subject to the ordinary provisions of the CGST Act.
The dispute was whether these products fall under heading 3101 (fertilisers) or heading 3808 (plant-growth regulators). The circular clarifies that sea-weed extract based bio-stimulants, registered under Schedule VI to the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985, are classifiable under heading 3101 (S.No. 237 of Schedule I of notification No. 09/2025-C.T.R.), implemented by inserting an explanation into that entry.
Past period regularised: as with sublimation paper, the earlier period is regularised on an “as is where is” basis.
Getting classification right at the invoice stage avoids both an under-charge that invites a demand later and an over-charge that makes a supplier uncompetitive – please reach out to our team and we will be happy to assist with classification and rate reviews for any of these four categories, or others facing similar disputes.
| Term | What it means |
|---|---|
| Classification (under GST) | Deciding which tariff heading or sub-heading a product falls under, which in turn fixes the applicable GST rate. |
| “As is where is” regularisation | A Council-recommended relief where GST already paid for an earlier period, under either of two competing classifications, is accepted and not reopened once a clarification settles the question going forward. |
| Margin scheme | A GST scheme for dealers in old and used goods (including motor vehicles) that taxes only the dealer’s margin, at a concessional rate, in exchange for not claiming input tax credit on the goods themselves. |
| Heading / sub-heading | The numbered classification codes under the Customs Tariff Act that group similar goods together for duty and tax purposes. |
Heading 4809, attracting 18% GST under S.No. 176 of Schedule II of notification No. 09/2025-C.T.R. dated 17.09.2025 – not sub-heading 4810 22, which some suppliers had argued for. The GST Council has recommended regularising the past period on an “as is where is” basis, so past classification disputes are not reopened once this clarification applies going forward.
No. Circular No. 265/11/2026-GST clarifies that the word “etc.” in the relevant notification entries covers the entire heading 9503 of the Customs Tariff Act, 1975 – including dolls, dolls’ carriages, other toys, reduced-size (“scale”) models and similar recreational models (working or not), and puzzles of all kinds – not only wheeled toys.
Yes. The circular clarifies that the condition barring input tax credit under the margin scheme notifications applies only to the tax paid on the second-hand motor vehicle itself. ITC on other inputs and input services used in that business – spares, repair and maintenance, technology services, rent, marketing and advertisement services – remains available, subject to the ordinary provisions of the CGST Act.
As fertilisers under heading 3101, under S.No. 237 of Schedule I of notification No. 09/2025-C.T.R. dated 17.09.2025 – provided the product is registered under Schedule VI to the Fertiliser (Inorganic, Organic or Mixed) Control Order, 1985. This resolves the earlier uncertainty over whether such products should instead be classified as plant-growth regulators under heading 3808.
It means that for periods before this clarification, GST already paid under either classification interpretation is accepted and not reopened or re-assessed, even though the clarification now settles which classification and rate applies going forward. This relief applies to the sublimation paper and sea-weed bio-stimulant clarifications in this circular.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.