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

New Delhi: The Goods and Services Tax (GST) Council will address the possibility of reducing the GST rate on health and life insurance premiums at its next meeting in November. The issue, raised by Opposition parties during the recent Parliament session, has gained considerable attention due to its potential impact on insurance policyholders across the country.

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 will also explore related issues, such as GST levied on policies bought by resident welfare associations.

“There appears to be a broad consensus among the states to reduce the current 18 per cent GST on insurance premiums. A Group of Ministers, headed by Bihar Deputy Chief Minister Samrat Choudhary, has been tasked with submitting a report by the end of next month,” Sitharaman stated. The GST Council will make a final decision on the matter after the GoM’s recommendations are submitted.

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 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.

In addition to insurance premiums, the Council addressed other significant taxation issues. A separate GoM will evaluate how to handle collections from the cess levied on luxury and sin goods, which is set to sunset on March 31, 2026.

During the meeting, several important tax rate reductions were agreed upon. Notably, the GST rate on certain cancer drugs — Trastuzumab Deruxtecan, Osimertinib and Durvalumab — will be reduced from 12 per cent to 5 per cent, a move expected to make these life-saving treatments more affordable for patients. Additionally, helicopter rides for pilgrimages to Kedarnath will now be taxed at 5 per cent when passengers are transported on a seat-share basis. The past GST dues on these rides will be regularised on an “as is where is” basis, while the charter of helicopters will continue to attract 18 per cent GST.

Another major decision was to lower the GST on namkeens, a popular Indian snack, from 18 per cent to 12 per cent. This reduction is likely to benefit both consumers and manufacturers.

The Council also reviewed the status of the Group of Ministers’ report on rate rationalisation, including the taxation of online gaming. Since October 2023, entry-level bets on online gaming platforms and casinos have been subject to a 28 per cent GST. Previously, many companies argued for different tax rates between games of skill and games of chance. However, the Council clarified in August that all online gaming platforms must uniformly pay the 28 per cent tax.

The taxation on the online gaming sector will be reviewed after six months of implementation to assess its impact on the industry.

Meanwhile, West Bengal Finance minister Chandrima Bhattacharjee urged complete exemption of GST on health and life insurance premiums from the current 18 per cent.

“As per Niti Aayog report, 30 per cent of the population remains outside the ambit of health insurance. So, how would people opt for such insurance if they have to pay 18 per cent tax? So, I have called for complete exemption,“ Bhattacharjee said.