The first GoM will focus on rationalising GST rates for medical and life insurance, while the second will determine future of compensation cess beyond March 2026.
NEW DELHI: Finance Minister Nirmala Sitharaman announced on September 9 that the GST Council will establish two critical Groups of Ministers (GoM).
The first GoM will focus on rationalising GST rates for medical and life insurance, while the second will determine the future of the compensation cess beyond March 2026.
The GoM on insurance will present its findings by the end of October, and its recommendations, which include considerations for senior citizens and various forms of insurance such as term and group policies, will be discussed in the Council’s next meeting in November.
This meeting will focus on potentially reducing GST rates on health and life insurance.
The call for a full exemption on health insurance was echoed by West Bengal Finance Minister Chandrima Bhattacharya, who was supported by Goa’s Chief Minister. Many other state ministers also voiced the need for rate reductions.
Cancer drug rate slashed to 5%
In another key decision, the Council lowered the GST rate on cancer drugs from 12 per cent to 5 per cent, bringing much-needed relief to patients and the healthcare sector.
R&D funds
The Council also approved a significant relief for research and development (R&D) activities. Any funds, whether public or private, provided to universities established by central or state laws or with income tax exemptions will now be exempt from GST.
This decision follows tax notices sent to seven institutions, which will now be regularised under the new guidelines.
Future of Compensation Cess
A Group of Ministers will be tasked with determining the future of the compensation cess post-March 2026.
The cess, which was originally extended to repay GST loans, is expected to clear all loan repayments by January 2026. A projected surplus of Rs40,000 crore will remain, and the GoM will decide the future use of this cess.
Adjustments in various sectors
The Council also decided to exempt GST on services imported by foreign airlines’ establishments in India through related party transactions, provided these services are without consideration. Furthermore, the Council recommended regularising past transactions.
The GST on namkeens will be reduced from 18 per cent to 12 per cent, while the GST rate on car and motorcycle seats will increase from 18 per cent to 28 per cent.
A reverse charge mechanism (RCM) will be introduced for metal scrap transactions, with a 2 per cent TDS on B2B transactions involving registered suppliers.
Additionally, B2C e-invoicing will be rolled out on a pilot basis in select states to streamline exports for foreign tourists.
Other key decisions
Air conditioner services for railways will attract 28 per cent GST.
A committee will be formed to address a Rs14,000 crore Integrated GST (IGST) deficit and update the formula for its distribution. This committee, led by the additional secretary in revenue, will present its report by October.
The Council clarified that helicopter services on a sharing basis will attract 5 per cent GST.
Section 11A, addressing retrospective tax demands, will be used only in rare cases, providing industries relief from punitive tax demands.
The Council approved the inclusion of renting commercial property by an unregistered person to a registered person under reverse charge mechanism (RCM) to curb revenue leakage.
An invoice management system will be introduced to resolve input tax credit mismatches, which have triggered several tax notices.
