The GST Council has recommended a series of changes and clarifications covering goods and services, including input tax credit relief for second-hand vehicle dealers, a 5% GST option for specified electric vehicle services, new compliance requirements for certain waste and scrap transactions, and exemptions for agricultural support and other services.
The recommendations also address classification disputes involving sublimation paper, toys and seaweed-based bio-stimulants, alongside the tax treatment of e-commerce delivery services, vehicle leasing, highway concessions and banking transactions.
The proposals form part of the recommendations of the 57th GST Council meeting held in New Delhi on October 8, 2026, chaired by Union Finance Minister Nirmala Sitharaman. The official announcement describes the meeting’s focus as process reforms, trade facilitation and clarifications on the applicability of GST to specified goods and services.
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These measures are recommendations. Their operative scope, conditions and effective dates will depend on the relevant notifications, circulars and other implementing instruments.
Second-Hand Vehicle Dealers To Get Clarity On ITC For Business Expenses
An important clarification concerns dealers supplying second-hand vehicles under the GST margin scheme. The Council recommended clarifying that the restriction on input tax credit applies to the tax paid on the second-hand vehicles purchased by the dealer, rather than extending to every input or service used in the business.
Accordingly, dealers would be permitted to avail eligible ITC on expenses such as spare parts, repairs and maintenance, technology services, rent, marketing and advertising. Such credit would remain subject to the applicable eligibility conditions under GST law.
The distinction is significant for businesses that incur expenditure on refurbishing vehicles, operating dealerships and arranging sales through digital platforms. The recommendation separates the restriction attached to procurement of the used vehicle from the treatment of other business expenses.
The clarification concerns Notification No. 8/2018-Central Tax (Rate), Notification No. 9/2018-Integrated Tax (Rate), and Notification No. 1/2018-Compensation Cess (Rate).
Reverse Charge And 2% TDS Proposed For Specified Waste And Scrap
The Council recommended bringing specified supplies of waste and scrap under the reverse charge mechanism when supplied by an unregistered person to a registered person.
The identified categories are plastic waste and scrap, electrical and electronic waste and scrap, waste and scrap of tyres, and used cooking oil.
Under the proposed arrangement, the registered recipient would be liable to pay GST under reverse charge even where the unregistered supplier’s turnover remains below the registration threshold. The supplier would nevertheless have to obtain registration upon crossing the applicable threshold.
For supplies of the specified waste and scrap between registered persons, the Council recommended a 2% tax deduction at source requirement.
The proposals establish different compliance treatments for purchases from unregistered suppliers and transactions between registered businesses. The detailed notification will be relevant to determining the precise coverage, deduction requirements and operational conditions.
Nil GST Recommended For Isabgol Seeds
The Council recommended prescribing a nil GST rate for psyllium seeds, commonly known as Isabgol or Isobgul, irrespective of whether they are fresh, chilled, frozen or dried.
The recommendation seeks to provide consistent tax treatment across these forms of the seeds. Its stated scope concerns psyllium seeds; the classification and treatment of other products derived from them would need to be assessed separately.
Classification Clarity For Sublimation Paper, Toys And Bio-Stimulants
Sublimation paper is proposed to be clarified as falling under tariff heading 4809. The Council also recommended regularising past cases on an “as is where is” basis.
For toys, the Council recommended clarifying that the relevant GST rate entries cover all categories of toys falling under heading 9503 of the Customs Tariff Act, 1975, including dolls, puzzles and other toys. Their coverage would not be restricted to tricycles, scooters and pedal cars.
The clarification relates to Serial No. 497 of Schedule I and Serial No. 616 of Schedule II of Notification No. 09/2025-Central Tax (Rate), dated September 17, 2025. Classification within heading 9503 and the conditions of the applicable entry would remain relevant.
The Council further recommended that seaweed-extract-based bio-stimulants registered under Schedule VI to the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985, be classified as fertilisers under heading 3101.
An explanation is proposed to be inserted at Serial No. 237 of Schedule I of Notification No. 09/2025-Central Tax (Rate). Past cases involving these qualifying bio-stimulants are also proposed to be regularised on an “as is where is” basis.
Retreaded Tractor Tyres To Receive Treatment Aligned With New Tyres
The Council recommended aligning the GST rate on retreaded tractor tyres with the rate applicable to new tractor tyres.
The proposal addresses an anomaly in their tax treatment. The recommendation supplied does not specify the numerical rate, which will need to be read from the applicable implementing notification.
Historical Compensation Cess Relief For Canteen Supplies
The Council recommended exemption from compensation cess that was not levied by the Canteen Stores Department on two-wheelers and four-wheelers during the period from July 1, 2017, to September 30, 2022.
Similar relief was recommended for compensation cess not levied by the Canteen Stores Department and Unit Run Canteens on aerated drinks from July 1, 2017, to March 31, 2022.
The proposed relief concerns identified historical periods and supplies. Its wording should not be treated as a general exemption for every subsequent canteen transaction.
5% GST Option For Specified Electric Vehicle Transport Services
For services, the Council recommended an option to pay GST at 5%, with restricted input tax credit, on passenger transportation and rental of motor vehicles with operators where an electric vehicle is used.
A stated condition is that the cost of battery charging must be included in the consideration charged for the service.
The proposal therefore concerns a specified service arrangement involving an electric vehicle and, for rentals, an operator. The precise ITC restrictions and conditions for exercising the option will depend on the implementing notification.
E-Commerce Delivery Services Proposed At 5% Without ITC
The Council recommended bringing delivery services supplied through an electronic commerce operator under Section 9(5) of the CGST Act, 2017, where the underlying service provider is not liable for registration under Section 22(1).
Courier and postal services are excluded from this particular recommendation. The proposed GST rate for the covered delivery services is 5% without ITC.
Placing qualifying services under Section 9(5) would make the electronic commerce operator responsible for paying GST on those notified supplies.
Separately, the Council recommended a 5% GST rate without ITC for delivery services relating to goods supplied or ordered through an electronic commerce operator.
It also proposed excluding such e-commerce-linked goods transportation from the exemption for services supplied by a goods transport agency to unregistered persons under Entry 21A of Notification No. 12/2017-Central Tax (Rate).
The proposals address both the rate applicable to delivery services and the availability of an existing transportation exemption. Their interaction will require careful reading of the final notifications.
Clarity Proposed On Recoveries Under Vehicle Leasing Contracts
The Council recommended clarifying the GST treatment of statutory and ancillary amounts incurred by a vehicle lessor and subsequently recovered from the lessee.
The identified recoveries include registration charges, road tax, insurance and FASTag charges connected with motor vehicle leasing.
The recommendation identifies the issue requiring clarification but does not itself set out a uniform tax treatment for every recovery. The resulting clarification will be relevant to how lessors structure invoices and determine the taxable value of leasing transactions.
Limited Same-Line ITC For Restaurants, Hotels And Fitness Services
The Council recommended allowing limited input tax credit within the same line of business for restaurant and outdoor catering services, hotel accommodation valued up to ₹7,500 per unit per day, and gym or fitness services.
The proposed approach would follow the limited credit framework currently available for passenger transportation, tour operator services and renting of motor vehicles.
This measure could reduce the accumulation of tax where a business procures a qualifying service and makes an onward supply within the same service category. However, it should not be read as permitting unrestricted ITC on every expense incurred by restaurants, hotels or fitness establishments.
The final conditions will determine which inward supplies qualify and how the same-line-of-business requirement operates.
Helicopter Passenger Services In Specified Regions To Be Exempt
The Council recommended exempting passenger transportation by helicopter on a seat-sharing basis from or to airports and helipads located in the north-eastern states, Sikkim and Bagdogra in West Bengal.
The geographical scope and seat-sharing condition are central to the proposed exemption. The recommendation does not describe a blanket exemption for all helicopter services or charter arrangements.
Exemptions For Seed Warehousing And Coffee Curing
The Council recommended exempting storage and warehousing services for seeds meant for sowing.
The proposed exemption is linked to the intended use of the seeds and should therefore be distinguished from storage of seeds or agricultural commodities intended for other purposes.
It also recommended exempting agricultural support services involving the curing of coffee when supplied by coffee curers to cultivators.
The stated proposal concerns the curing service supplied to cultivators, rather than a general exemption for all processing or commercial activities involving coffee.
Relief For Services Supplied By Seamen’s Provident Fund Organisation
Services provided by the Seamen’s Provident Fund Organisation to persons governed by the Seamen’s Provident Fund Act, 1966, are proposed to be exempt from GST.
The recommendation links the exemption to both the service provider and the persons covered by the specified legislation.
Self-Certification Mechanism For R&D Exemption
For research and development services, the Council recommended a simpler mechanism involving self-certification by the head of the institution or organisation undertaking the activity.
The certification would confirm that the activity constitutes research and development rather than consultancy, for determining eligibility under Entry 44A of Notification No. 12/2017-Central Tax (Rate).
The proposal simplifies the method of establishing the nature of the activity. It does not describe an exemption for consultancy merely because it is undertaken by an institution that also conducts research.
Exemption For Certain Overseas Services Received By Foreign Shipping Lines
The Council recommended exempting imports of services by an Indian establishment of a foreign shipping company from a related person or another establishment outside India where the services are supplied without consideration.
It also recommended regularising the past period on an “as is where is” basis.
The absence of consideration is an express feature of the proposal. The recommendation does not extend, on its stated terms, to every service imported by a foreign shipping company’s Indian establishment.
GST Relief For Toll Operate Transfer Highway Concessions
For highway projects, the Council recommended exempting services involving the grant of the exclusive right, licence and authority to a concessionaire to demand, collect and appropriate toll fees.
The proposal covers such grants by the Government, including local authorities, governmental authorities and government entities, and addresses the treatment of upfront or concession amounts paid under the Toll Operate Transfer model.
Separately, the Council recommended a special procedure governing valuation and the timing of GST payment on operation and maintenance services supplied by concessionaires to the concessioning authority under the TOT model.
The two recommendations concern distinct aspects of the highway arrangement: the grant of toll collection rights and the operation and maintenance services supplied under the concession.
Bank Funds Transfer Pricing To Be Clarified As Interest
The Council recommended clarifying that notional amounts recorded as interest in banks’ books for internal Funds Transfer Pricing transactions fall within the definition of interest under Notification No. 12/2017-Central Tax (Rate).
The recommendation concerns notional transfers of funds between bank branches arranged by the head office as part of the Funds Transfer Pricing mechanism.
The clarification is intended to settle the character of the identified accounting amounts. It should be distinguished from the treatment of separate fees or charges for other banking services.
Notifications To Determine Scope And Commencement
The recommendations combine classification clarifications, targeted exemptions, changes in tax liability and limited credit relief. Several also address historical periods through regularisation or exemption.
Businesses in the affected sectors will need to examine the implementing instruments for commencement dates, eligibility conditions, documentary requirements and treatment of past transactions. A Council recommendation alone should not be treated as an immediately operative change to a tax rate, exemption or compliance obligation.
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