MUMBAI: After much hue and cry over 18% GST on health and life insurance premiums, the GST Council in its 54th meeting on Monday reached a broad consensus on reducing taxes and decided to constitute a Group of Ministers (GoM) to deliberate on the issue. The panel will submit its report by October-end this year and the Council will take a call on this in its upcoming meeting in November.
In the meeting chaired by Finance Minister Nirmala Sitharaman, the GST Council also made several key decisions and reviewed three status reports submitted by the Group of Ministers on rate rationalisation, real estate, and online gaming.
The finance minister, while addressing the media, announced the formation of a new GoM with existing members on rate rationalisation to study rate cuts on health and life insurance premiums.
The Council also recommended the formation of a GoM to study the future of compensation cess.
By January 2026, the Centre is expected to clear back-to-back loan payments to states related to GST compensation, with total cess collections projected to reach Rs 8.66 lakh crore and an estimated surplus of ₹40,000 crore after repayments, Sitharaman said.
Revenue Secretary Sanjay Malhotra emphasised the need for the GST Council to decide on utilising this surplus, stating, "Before we can make use of the surplus, the council must determine the future course of action. The compensation cess cannot continue indefinitely."
He noted that while the cess collection has been extended until March 2026, its continuation must be reviewed, and if loans are repaid earlier, the cess collection cannot exceed legal limits.
In addition, the Council reduced GST rates on cancer drugs— Trastuzumab Deruxtecan, Osimertinib and Durvalumab—from 12% to 5%.
The Council also decided there will be 5% GST on transport of passengers by helicopters on a seat-share basis and 18% on the charter of helicopters.
In a significant development, the Council exempted supply of research and development services by a government entity, or a research association, university, college or other institutions notified u/s 35 of the Income Tax Act using government or private grants.
It may be recalled that an institution like IIT Delhi had also received show cause notice from the directorate general of GST intelligence (DGGI) amounting to Rs 120 crore.
"GST exemption on public and private research grants to higher education institutions is a major boost that shall not only increase research outcome but also achieve global tax parity. Indian academia is hugely relieved and on behalf of eligible universities & institutions, I thank the Hon’ble FM," said Dr S Vaidhyausbramaniam, Vice-Chancellor of SASTRA University, which is one of the institutions that received show cause notice earlier.
The Council has also decided to exempt the import of services by branch offices of foreign airline companies from related entities or other establishments outside India when these services are provided without any payment. Additionally, the Council has recommended that past instances of such transactions be regularised on an 'as is, where is' basis.
Meanwhile, the GST rate on car seats has been increased from 18% to 28%. This uniform rate of 28% 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%.