The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 266/12/2026-GST dated October 28, 2026, addressing the distinction between research and development (R&D) services and consultancy services under GST.
The clarification follows the recommendations of the 57th GST Council meeting held on October 8, 2026, and aims to promote uniformity in the interpretation and application of GST provisions.
GST Exemption for Research and Development Services
The issue dates back to the 54th GST Council meeting held on September 9, 2024. At that meeting, the Council recommended an exemption for specified research and development services provided by eligible government entities, research associations, universities, colleges and other institutions notified under clauses (ii) or (iii) of Section 35(1) of the Income-tax Act, 1961, where consideration is received in the form of grants.
This exemption was subsequently introduced with effect from October 10, 2024, through Entry No. 44A of Notification No. 12/2017-Central Tax (Rate).
The Council also recommended examining the definition of research and development to clarify how such services should be distinguished from consultancy services.
Why Was a Clarification Required?
One of the key issues was the absence of specific definitions of terms such as research, research and development, consulting and consultancy under the CGST Act, 2017, the rules and notifications issued under it, and the explanatory notes to the scheme of classification of services.
The distinction is important when determining whether a particular service falls within the scope of the exemption available for eligible R&D services provided against grants.
The latest circular addresses this issue as part of the government's effort to ensure a more consistent interpretation of GST provisions.
Circular No. 266/12/2026-GST: Key Details
- Circular Number: 266/12/2026-GST
- Date of Issue: October 28, 2026
- Issuing Authority: CBIC, Ministry of Finance, Department of Revenue
- Subject: Clarifications regarding the applicability of GST on certain services
- Legal Basis: Section 168(1) of the Central Goods and Services Tax Act, 2017
- Relevant GST Council Meeting: 57th meeting held on October 8, 2026
- Core Issue: Distinguishing research and development services from consultancy services through a self-certification mechanism.
What Should Taxpayers and Institutions Note?
Eligible institutions and professionals dealing with research grants should examine the circular alongside the existing exemption under Entry No. 44A of Notification No. 12/2017-Central Tax (Rate).
The distinction between R&D and consultancy services is particularly relevant when evaluating the GST treatment of services provided under research-related arrangements. The applicable treatment should be determined with reference to the relevant notification and the clarification issued by CBIC.
Important: The supplied extract ends during paragraph 2.2 and does not contain the detailed self-certification procedure or the complete criteria for distinguishing R&D from consultancy services. Those details should be verified from the complete circular before making a final GST classification or exemption decision.
Conclusion
Circular No. 266/12/2026-GST addresses an important interpretational issue concerning GST on research and development and consultancy services. By taking forward the GST Council's recommendations, CBIC seeks to bring greater clarity and consistency to the treatment of specified R&D services, particularly those provided by eligible institutions against grants.
Taxpayers and institutions should refer to the complete circular and the applicable GST exemption notification before determining the taxability of a particular transaction.
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