GST on medicines involves various tax rates and exemptions, affecting healthcare and the pharmaceutical sector. Understanding these aspects is essential for consumers and businesses in the medical field.
GST on Medicines
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. The GST rate for medicines varies depending on the type of medicine.
Latest Update in Medicines & Medical
In India, the GST Council has recently exempted cancer-fighting drugs, medicinal items for rare diseases, and food products for special medical purposes from GST tax. This exemption is expected to provide significant relief to patients struggling to afford these expensive treatments. While this is a positive development, it is important for businesses involved in the supply and distribution of these exempted items to maintain their GST registration. This registration ensures that they remain compliant with GST regulations, can accurately report their transactions, and are prepared to handle any changes in tax status should exemptions be modified in the future.
Medicine GST Rates
| Type of Medicine | GST Rate |
| Nil Rate | Blood and its by-products, all contraceptives |
| 5% | Life-saving drugs, such as vaccines and medicines for tuberculosis, AIDS, diabetes, malaria, etc. |
| 12% | Most other medicines, including Ayurvedic, Unani, homoeopathic, Siddha, or biochemic systems medicaments |
| 18% | Nicotine gums, which contain nicotine polacrilex, and other specific medicines |
HSN Code for Pharmaceutical Products
The HSN (Harmonized System Nomenclature) code is a six-digit international standardized system for classifying traded products. The HSN code for pharmaceutical products is Chapter 30.
Indian Pharmaceutical Industry
The Indian pharmaceutical industry is one of the largest in the world. It is estimated to be worth over $50 billion and is expected to grow at a CAGR of 10% over the next few years. The industry is driven by factors such as rising disposable incomes, an increasing aging population, and a growing prevalence of chronic diseases.
NIL GST on Hospitalisation
In India, the Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services. However, certain healthcare services, including hospitalization, are exempt from GST. This means that patients do not have to pay any additional GST on the cost of their hospitalization.
Impact of GST on Medicines and Medical Supplies
The GST has had a mixed impact on the prices of medicines and medical supplies in India. Some medicines, such as life-saving drugs, are now exempt from GST, which has led to a reduction in their prices. However, other medicines, such as those for chronic diseases, are now subject to a higher GST rate, which has led to an increase in their prices.
What is the Value of Supply to Compute GST on Medicines?
The value of supply for GST purposes is the transaction value of the goods or services supplied. This means that the GST should be calculated on the price that the patient is actually charged for the medicines or medical supplies.
Need to know how to calculate GST percentage? Our GST calculation formula makes it simple and accurate.
GST on the Import of Pharmaceuticals
The GST rate on the import of pharmaceuticals is the same as the GST rate for similar domestically manufactured products. This means that there is no additional GST levied on imported medicines.
GST on Expired Medicines or the Return of Drugs
The GST on expired items or the return of drugs is nil. This means that there is no GST payable on these items.
Positive Effects of GST on Pharmaceutical Industries
- The GST has led to a more uniform taxation system for the pharmaceutical industry, which has made it easier for businesses to operate and comply with tax laws.
- The GST has also made it easier for businesses to claim input tax credits, which has reduced their overall tax burden.
- The GST has also led to a more transparent and efficient tax system, which has attracted more investment into the pharmaceutical industry.
GST on Medicines
During its meeting on 3 June 2017, the GST Council established GST rates for medicines in India. According to the council’s decision, medicines are categorised under the 37th chapter of the HSN Code and are subject to GST at rates ranging from NIL to 28%, depending on the specific HSN code of the item. This article explores the applicable GST rates for medicines and their corresponding HSN codes.
Negative Effects of GST on Pharmaceutical Industries
- The GST has increased the compliance costs for businesses, which has put a strain on their profits.
- The GST has also made it more difficult for businesses to compete with unregulated businesses, which are not required to pay GST.
- The GST has also led to an increase in the prices of some medicines, which has made them less affordable for patients.
FAQs on GST on Medicines
What is the GST rate on medicines in India?
The GST rate on medicines in India varies depending on the type of medicine. Here is a breakdown of the different GST rates for medicines:
- Nil Rate: Blood and its by-products, all contraceptives
- 5%: Life-saving drugs, such as vaccines and medicines for tuberculosis, AIDS, diabetes, malaria, etc.
- 12%: Most other medicines, including Ayurvedic, Unani, homoeopathic, Siddha, or biochemic systems medicaments
- 18%: Nicotine gums, which contain nicotine polacrilex, and other specific medicines
Are there any exemptions or concessions on GST for medicines?
Yes, there are some exemptions and concessions on GST for medicines. For example, the import of life-saving drugs is exempt from GST. Additionally, certain medicines for rare diseases and food products for special medical purposes are also exempt from GST.
Can I claim Input Tax Credit (ITC) on GST paid for medicines purchased for my pharmacy business?
Yes, you can claim Input Tax Credit (ITC) on GST paid for medicines purchased for your pharmacy business. This means that you can reduce your output GST liability by the amount of ITC you have accumulated.
How is GST calculated on the sale of medicines at a pharmacy?
The GST on the sale of medicines at a pharmacy is calculated on the MRP (Maximum Retail Price) of the medicines. The pharmacy must add the applicable GST rate to the MRP and issue a GST invoice to the customer.
What is the impact of GST on the prices of medicines for consumers?
The impact of GST on the prices of medicines for consumers has been mixed. The prices of some medicines, such as life-saving drugs, have come down due to the exemption from GST. However, the prices of other medicines, such as those for chronic diseases, have gone up due to the higher GST rate.
Is GST applicable to both over-the-counter (OTC) and prescription medicines?
Yes, GST is applicable to both over-the-counter (OTC) and prescription medicines. However, there are some exceptions, such as the exemption for contraceptives.
How do I ensure that the correct GST is charged on medicines I purchase from my supplier?
You can ensure that the correct GST is charged on medicines you purchase from your supplier by asking them to provide you with a GST invoice. The GST invoice should include the MRP of the medicines, the applicable GST rate, and the total amount of GST payable.
Can individuals claim GST refunds on medicines purchased for personal use?
No, individuals cannot claim GST refunds on medicines purchased for personal use. GST refunds are only available to registered businesses.
What are the implications of GST on pharmaceutical manufacturers and retailers?
GST has had a mixed impact on pharmaceutical manufacturers and retailers. On the one hand, GST has simplified the tax compliance process for businesses. On the other hand, GST has increased the compliance costs for businesses.
Is GST applicable to imported medicines?
Yes, GST is applicable to imported medicines. The GST rate for imported medicines is the same as the GST rate for similar domestically manufactured products.
