CBIC Issues Crucial GST Clarifications for Banking, Shipping, and Leasing Sectors.
The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 266/12/2026-GST (dated October 28, 2026), providing essential clarifications on six key service-related issues to streamline compliance and reduce litigation.
Here is a professional summary of the key directives:
1. Exemption on R&D Services
a) Self-Certification Permitted: To claim GST exemptions on qualifying, grant-funded Research & Development (R&D) services, self-certification signed by the head of the eligible institution is now deemed sufficient proof of compliance.
2. Services Imported by Foreign Shipping Companies
a) Prospective Exemption: Specified imports of services by foreign shipping lines from their related entities outside India without consideration are exempt from GST effective November 1, 2026.
b) Retrospective Regularisation: To address historical disputes, the past period from July 1, 2017, to October 31, 2026, has been regularised on an “as is where is” basis, meaning no demand will be raised for non-payment during this tenure.
3. Valuation of Motor Vehicle Leasing Services
a) Inclusion of Ancillary Charges: Road tax, insurance premiums, registration fees, and FASTag charges recovered by a lessor from the lessee must be included in the taxable value of leasing services for GST calculation.
4. Legal Status of TRAI under GST Act
a) Not a Government Entity: The Telecom Regulatory Authority of India (TRAI) does not qualify as “Government” under Section 2(53) of the CGST Act, 2017, thereby affecting the applicability of specific government exemptions to its services.
5. Banking Fund Transfer Pricing (FTP) Mechanism
a) Exemption on Notional Interest: Specified notional interest entries recorded under the internal Fund Transfer Pricing (FTP) mechanisms of banks are covered under the standard GST interest exemption, clarifying that these internal transfers do not attract tax.
6. NBFC Co-Lending Services
a) Taxability of Outsourced Services: Support services provided by Non-Banking Financial Companies (NBFCs) to banks under co-lending arrangements—such as KYC verification, underwriting, loan servicing, and debt recovery—are fully taxable under GST.
Before taking any decision please ask from your financial advisors or Chartered Accountant.