With the release of Circular No. 245/02/2025-GST, the Central Board of Indirect Taxes & Customs ( CBIC ) clarified the regularization of GST payments on research and development services rendered by government entities in exchange for funds from those groups.
In its 54th meeting, which took place on September 9, 2024, the GST Council suggested exempting research and development services from consideration in the form of grants that are offered by government entities, research associations, universities, colleges, or other institutions that are notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961. By virtue of notification No. 08/2024-CT(Rate) dated 8.10.2024, the same has been exempted with effect from 10.10.2024.
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Regarding whether or not government entities’ provision of research and development services against grants from government agencies such as DRDO, CSIR, SERB, etc. is taxable, there were some ambiguous interpretations. With the release of notification No. 08/2024-CT(Rate) dated 08.10.2024, which specifically exempted research and development services notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961, against consideration in the form of grants, these issues are now resolved for the period beginning on 10.10.2024.
In light of this, at its 55th meeting, the Council recommended regularizing the payment of GST on the provision of R&D services by government entities against grants received from those entities for the 1 July 2017 to the 9 October 2024 period on a “as is where is” basis.
The payment of GST on the provision of research and development services by government entities against grants received from government entities is regularized for the period of July 1, 2017, to October 9, 2024, on a “as is where is” basis, as advised by the 55th GST Council.
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