GST Council to finalise tax cuts on health, life insurance premiums in Nov, sets up GoM

NEW DELHI: The GST Council on Monday reached a broad consensus on reducing taxes on health and life insurance premiums, and a final decision on this would be taken in the November meeting.

The Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state counterparts, exempted from GST grants or funds received for R&D by central or state-affiliated universities or those institutions which have Income Tax exemptions.

Briefing reporters after the 54th meeting of the GST Council, Sitharaman said the Council has decided to set up two new Groups of Ministers (GoM) -- one on medical and health insurance and the other on compensation cess.

The GoM on compensation cess would suggest to the Council how to go about the GST compensation cess, which is levied on luxury, sin and demerit goods, once the loans taken to meet the shortfall in revenue of states during Covid-affected years are repaid.

The government had borrowed Rs 2.69 lakh crore in fiscals 2021 and 2022 to make good states' revenue loss and the GST Council had then decided to extend the compensation cess levy till March 2026 to repay the loan and interest.

Sitharaman said the loan and interest are expected to be repaid as early as December 2025, or January 2026. The GoM will decide on the future of the levy, how it would be apportioned between the Centre and states, and changes required in law as it cannot be called compensation cess any more.

The GST Council has decided to reduce tax rate on cancer drugs -- Trastuzumab Deruxtecan, Osimertinib and Durvalumab from 12 per cent to 5 per cent, certain categories of namkeen to 12 per cent, from 18 per cent.

However, GST rate on car seats has been increased from 18 per cent to 28 per cent. This uniform rate of 28 per cent will be applicable prospectively for car seats of motor cars in order to bring parity with seats of motorcycles which already attract a GST rate of 28 per cent.

The Council also decided there will be 5 per cent GST on transport of passengers by helicopters on seat share basis and 18 per cent on the charter of a helicopter.

Also, flying training courses conducted by DGCA-approved Flying Training Organizations (FTOs) have been exempted from GST.

Sitharaman said the Council discussed the issue of reducing taxes on medical and health insurance and it was felt that more discussions were needed with regard to group insurance policies by resident welfare associations and companies as well as premiums paid by senior citizens and life insurance vis-a-vis term insurance.

"So the insurance-related matter the Council felt because of the various dimensions that came in, it might be worth the Group of Ministers to quickly look into it and by end of October to come up with their suggestion so that the November GST Council meeting could take a call on it," Sitharaman told reporters here.

The members of the GoM on GST on health insurance would include ministers from Bihar, UP, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat.

Currently, 18 per cent GST is levied on health and life insurance premiums.

Referring to the issue of GST exemption on funds received by institutions for R&D, Sitharaman said Prime Minister Narendra Modi has asked her to exempt such funds from the tax.

"This whole issue of research-related funds going to institutions and notice that has gone to seven such institutions was not an attempt to tax terrorism. Where there are interpretation-related issues, an officer in the field will surely want to be sure that he is doing his job, collecting the money that he should collect because some of these research funds which have gone to such institutions had a component that they could be some kind of a quid pro quo," Sitharaman said.

She further said that seven such notices which were sent will be assessed by the tax officers and the rest cases of past period will be regularised.

Sitharaman further said that a committee of officers, headed by Additional Secretary (Revenue), will look into the formula for sharing the Integrated GST (IGST) between Centre and states. Currently, IGST Account is shared equally between Centre and states. It will look into ways to retrieve the money from states.

Revenue Secretary Sanjay Malhotra said that currently there is a negative balance of Rs 14,000 crore in IGST Account.

The GST Council also recommended rollout of a pilot for B2C e-Invoicing, following the successful implementation of e-invoicing in the B2B sector.

It would also provide an opportunity to retail customers to verify the reporting of the invoice in the GST return. The pilot will be rolled out on a voluntary basis in selected sectors and states.