Cancer drugs, Namkeens to get cheaper, no GST on research funds

Decision on insurance premium GST deferred, sent to GoM

New Delhi: The Goods and Service Tax (GST) Council, on Monday, decided to reduce taxes on cancer drugs and namkeen snacks like bhujia and mixture and exempt research funds from paying GST after notices to prominent universities like IIT Delhi and Tamil Nadu’s Anna University sparked major debate within the academic community with some calling it “tax terrorism”.

Goods and Services Tax (GST) on namkeen and savoury food products will be reduced from 18 per cent to 12 per cent. The GST rate of 5 per cent will continue on un-fried or uncooked snack pellets. The GST rate on cancer drugs namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab will be reduced from 12 per cent to 5 per cent.

Briefing the media after the meeting of the council, Finance Minister Nirmala Sitharaman said the reduced rates will apply “prospectively”.

Additionally, the much-anticipated potential reduction in GST on health insurance premium has been deferred. Sitharaman said that there were detailed discussions on the matter.

A Group of Ministers (GoM) headed by Bihar’s Deputy Chief Minister Samrat Choudhary will examine the issue and give its recommendation by the end of October. The GoM on rate rationalisation, which is also headed by Choudhary, will meet on September 23 to finalise its recommendation.

Funds given for research to universities established by the law of Centre, state governments as well as the private universities and research institutions who have obtained income tax exemptions will not be required to pay GST.

“Funds going to any one of these from the government or from private, whether quid pro quo or not, will be exempt,” the finance minister said.

Sitharaman, who chaired the meeting, said that, “there was complete unanimity on this proposal which I put forward.”

The move comes days after the Directorate General of GST Intelligence sent show cause notices to seven prominent academic institutions for unpaid taxes on research grants given since 2017. IIT Delhi has been asked to pay Rs 120 crore while tax notices to other institutions range from Rs 5 crore to Rs 60 crore.

“Past demands to be regularised on ‘as is where is’ basis,” as per an official statement released after the council meeting.

“Exemption given to research grants will ensure that more money flows into the R&D activity and regularisation of past demands on an as is where is basis is a good move,” said MS Mani, Partner, Deloitte India.

A GoM will also be constituted to dwell on the issue concerning compensation cess, which will cease after March 2026. If the cess has to be collected after March 2026, it cannot be called compensation cess. So the GoM will decide on the purpose of the cess, etc, for after March 2026, Sitharaman said.

She further informed that a committee of secretaries headed by Additional Secretary (Revenue) will be formed on integrated GST which is currently facing a negative balance. It will look into ways to retrieve the money from states.

The various GoMs recommendations on rate rationalisation, health insurance premium and online gaming are likely to be taken up in the next GST Council meeting in November.