29.10.2026: GST Council’s 57th Meeting Clarifications: Relief for Shipping Lines, R&D Institutions and Banks; NBFC Co-Lending Fees Taxable

The CBIC has issued Circular 266/12/2026-GST dated 28.10.2026, clarifying Six service-sector clarifications based on the GST Council’s 57th meeting. 

Key highlights of the Circular

1. R&D vs consultancy: self-certification accepted

  • Exemption under Entry 44A of Notification 12/2017-CT(R) (from 10.10.2024) applies to R&D services against grants by institutions notified under section 35(1)(ii)/(iii) of the Income-tax Act, 1961.
  • A certificate from the head of the institution that the activity is R&D, not consultancy, may suffice.

2. Foreign shipping companies: exemption plus past-period regularisation

  • Import of services by an Indian establishment from a related person or overseas establishment, without consideration, is exempt from 01.11.2026 (Notification 07/2026-IT(R), dated 27.10.2026).
  • The period 01.07.2017 to 31.10.2026 is regularised on an “as is where is” basis: no refund of tax paid, no demand for tax unpaid.

3. Motor vehicle leasing: recoveries are part of the lease value

  • Registration charges (including road tax), insurance, FASTag and other incidental charges recovered from the lessee are part of the composite leasing supply (sections 2(30), 8(a) and 15).
  • They are taxable at the leasing rate.

4. TRAI is not “Government”

  • As a statutory regulator, TRAI falls outside section 2(53) of the CGST Act.
  • Benefits meant for “Government” do not apply to it.

5. Bank Fund Transfer Pricing: exempt

  • Notional interest recorded on inter-branch fund transfers through the Head Office is “interest” under Notification 12/2017-CT(R).
  • It is therefore exempt, even though branches are distinct persons under section 25(4).

6. NBFC–bank co-lending: taxable

  • Services by NBFCs to banks are taxable under GST, with value as per the co-lending agreement. This covers sourcing, KYC, appraisal, underwriting, servicing, collection and recovery.
  • The arrangement is governed by the RBI (Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025.

What professionals should do

  • R&D institutions: issue head-of-institution certificates for grant-funded projects.
  • Shipping companies: close pending notices for the past period, citing the regularisation.
  • Banks: seek withdrawal of demands on FTP notional interest.
  • NBFCs: charge GST on co-lending service fees from now on, and assess exposure for past periods.
  • Vehicle lessors: include statutory and ancillary recoveries in the taxable value.

To acess the complete Circular https://cdn.taxo.online/wp-content/uploads/2026/10/circulars_266-1_compressed.pdf

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