GST Council Cuts Rates on Cancer Drugs, Namkeen; Defers Health Insurance Decision

New Delhi: The goods and services tax (GST) Council, chaired by Union finance minister Nirmala Sitharaman, on Monday announced a host of decisions, including a reduction in GST rates on certain essential items and rate on namkeen among others, but deferred some crucial ones, especially reducing the GST rate on health and life insurance premiums from the current 18 per cent and the GST on payment aggregators on income from transactions under Rs 2,000. The GST Council also decided to set up a new Group of Ministers (GoM) on GST rate reduction on medical health insurance and a report will be submitted by October end.

Briefing reporters after the 54th GST Council meeting, Ms Sitharaman said that it has been decided to have a GoM to look into the GST rate on life and health insurance. “We have told them to come up with a report by the end of October and the GST Council will meet in November and finalise the decision based on the GoM’s recommendation. The GoM will be headed by Bihar deputy chief minister Samrat Choudhary, who is currently heading the panel on GST rate rationalisation,” she said.

The GST Council was expected to decide on whether to reduce the tax burden on health insurance from the current 18 per cent or exempt certain categories of individuals, like senior citizens. However, the announcement has been deferred to the next meeting. The issue of taxation of insurance premiums had figured in Parliament discussions with Opposition members demanding that health and life insurance premiums be exempt from the GST, including transport minister Nitin Gadkari. “Many resident welfare associations have asked if they sign up for group coverage, and we need to deliberate on life insurance and term insurance,” she said.

The GST Council also decided to cut tax rates on cancer drugs to 5 per cent from 12 per cent and namkeens from 18 per cent to 12 percent. “A GoM will also be constituted to deal with the issue concerning compensation cess which will cease after March 2026,” Ms Sitharaman said, adding that the GST Council also maintained status quo on online gaming, casinos, and racecourses and deliberated on the GoM’s status report on rate rationalisation and online gaming.

The minister further said that a committee of secretaries headed by additional secretary (revenue) would be formed on the IGST, which is currently facing a negative balance and it would look into ways to retrieve the money from states. “The revenue from online gaming has increased by 412 per cent and has reached Rs 6,909 crore in just six months. Similarly, revenues from casinos have increased 30 per cent to Rs 214 crore in the six months after the GST was notified,” she added.

On the GST compensation cess, Ms Sitharaman also said that the council had discussed the GST compensation cess, which can be levied till March 2026 as per the extended period. However, the projected surplus from cess after repayment of loans is at Rs 40,000. “Probably, by January 2026, we will be clearing the loan and interest dues on borrowings made to compensate the States during the COVID period. To assess what to do after March 2026 with the compensation cess levy, we have agreed to form a GoM, which will study every state’s claims of compensation dues. It will also decide what to do with the cess after March 2026,” she added.

The finance minister also said that the GST council also decided that funds given for research to state-affiliated universities, those that have come about under state or central laws, or those that have obtained income tax exemption, can receive research funds both from the public (government) and private sectors and will be exempt from paying GST.

Meanwhile, the revenue secretary Sanjay Malhotra also told the media that government school boards in states and those under the Centre are being exempted from GST. “There was a decision to bring in the renting of commercial property by unregistered persons to registered persons under the reverse charge mechanism. This is already the case for residential properties, so this anomaly has been corrected,” he said.

Clarifying on the GST on advertising services, Malhotra said that there was a clarification on the place of supply relating to advertising services remitted by Indianzentities to foreign firms. “It is clarified that the foreign entity’s place will be considered the place of supply and hence, GST will be exempt,” Mr. Malhotra said.

Mr. Malhotra further said that a clarification would also be issued for the availability of input tax credits for vehicle dealers for demo vehicles supplied to them by automobile manufacturers. “E-invoicing will be introduced for B2C transactions to enable customers to assess if they have genuine products, but this will be voluntary in some states and sectors to begin with," he said.

The GST rate on car and motorcycle seats will be raised from 18 per cent to 28 per cent on a prospective basis. “It has also been decided to notify a 5 per cent GST for transport services using helicopters on a shared seat basis, as well as for air travel by economy class,” he added. #End#

Key Takeaways In GST Council meeting

Maintaining Status Quo

* Online gaming, casinos, and racecourses & further review on GoM’s status report

Decisions Taken

* GST Council reduces rate on cancer drugs to 5% from 12%

* GST on selected snacks reduced from 18% to 12%* GST on helicopter services for pilgrims & tourists will be reduced to 5% from 18%.

* Grants for R&D to universities, institutions to be exempt from GST

* Renting of commercials properties brought under reverse charge mechanism

* Import of services by related party transactions by airlines will be exempt

What were deferred

*GST exemption on life and health insurance

*Decision on 18% GST for payment aggregators for income generated from transactions below Rs 2,000

* GST clarification on taxation for oil & gas exploration contracts.