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.
The Goods and Services Tax (GST) has significantly reshaped the Indian economy, with its impact felt across various sectors, including the pharmaceutical industry. Under the GST framework, different categories of medicines, from life-saving drugs to over-the-counter products, attract different tax rates, typically ranging from 5% to 18%. While essential medicines and certain medical devices may be exempted or taxed at lower rates.
For pharmaceutical companies, compliance with GST regulations is key, with proper categorization under the Harmonized System of Nomenclature (HSN) codes being crucial for accurate tax filing. HSN codes, such as those for allopathic and ayurvedic medicines, help determine the applicable GST rates.
In this post, we explore the GST on medicines, how it impacts pricing, and the implications for the pharmaceutical industry, along with the HSN codes for medical products and how to calculate GST on medicines.
What is the GST Rate on Medicines?
The GST rate for medicines in India ranges from 0% to 12%, depending on their category. Drugs that are essential and life-saving are exempt from GST, whereas other drugs are subject to GST rates of 5% or 12%.
| Type of Medicine | Applicable GST Rate |
| GST on Essential Pharmaceutical Products | 5% |
| GST on Critical Life-saving Drugs | 5% |
| GST on Homeopathic Medicinal Preparations | 12% |
| GST on Allopathic Pharmaceutical Products | 12% |
| GST on Ayurvedic, Unani, and Siddha Medicines | 12% |
| GST on Medicines for Veterinary Use | 12% |
| GST on Medicaments in Bio-Chemic Systems | 12% |
| GST on Therapeutic and Prophylactic Medicaments | 12% |
| GST on Hormonal or Steroidal Medicaments | 12% |
How GST Rates Impact Medicine Prices?
It is important to note that the GST has streamlined the taxation system for medicines in India by replacing multiple taxes such as VAT, excise duty, and CST. A 0% GST rate ensures affordability and wider accessibility for life-saving drugs, such as cancer, HIV, and TB drugs. The cost of generic medicines, which are taxed at 5%, remains relatively affordable, ensuring accessibility for all.
However, branded and patented medicines, as well as dietary supplements, are subject to 12% GST, resulting in an increase in their final prices. Patients who require advanced medical treatments, particularly those with chronic or rare diseases, may be affected by this. As a result of the uniform GST system, pricing has become more transparent. The GST has, however, also resulted in higher prices for some categories in comparison with the pre-GST period.
GST simplifies compliance for businesses and reduces tax cascading, which is beneficial to manufacturers and distributors. Despite price increases on non-essential drugs, the structured tax system ensures that essential medicines remain accessible to consumers.
What is GST on Ayurvedic Medicines?
GST on Ayurvedic medicines in India is 12%, as they are classified under the category of herbal and alternative medicines. This rate applies to Ayurvedic formulations, herbal supplements, and traditional remedies, increasing their overall cost compared to generic medicines taxed at lower rates.
GST on Other Medical Products
The table below provides details on the GST rates applicable to various medical products:
| Category | Products | GST Rate | HSN Code |
| Blood and Immunological Products | Animal blood for therapeutic, prophylactic, or diagnostic uses; antisera, modified immunological products | 12% | 3002 |
| Toxins and Microorganism Cultures | Toxins and cultures of microorganisms (excluding yeasts) | 12% | 3002 |
| Mixed Medicaments | Medicaments with two or more constituents for therapeutic or prophylactic uses, not in retail sale (includes Ayurvedic, Homeopathic, etc.) | 12% | 3003 |
| Retail Medicaments | Mixed or unmixed products for therapeutic or prophylactic uses in retail sale (includes Ayurvedic, Homeopathic, etc.) | 12% | 3004 |
| Wadding and Bandages | Wadding, bandages, gauze impregnated or coated with pharmaceutical substances | 12% | 3005 |
| Pharmaceutical Goods | Sterile surgical catgut, tissue adhesives, laminaria tents, and similar items | 12% | 3006 |
| Tooth Powder | Tooth powder | 12% | 3306 |
| Feeding Bottles and Nipples | Feeding bottles and nipples | 12% | 3924 |
| Rubber Gloves | Surgical and medical examination rubber gloves | 12% | 4015 |
| Medical Instruments and Appliances | Instruments for surgical, medical, dental, and veterinary sciences | 12% | 9018 |
| Mechano-Therapy Appliances | Mechano-therapy, massage apparatus, oxygen therapy, aerosol therapy apparatus | 12% | 9019 |
| Breathing Appliances and Gas Masks | Breathing appliances and gas masks, excluding protective masks without replaceable filters | 12% | 9020 |
| X-ray Products | X-ray films, plates, machines for medical, dental, and veterinary uses | 12% | 3701, 9022 |
| Other Drugs and Medicines | Medicines intended for personal use | 12% | 3004 |
| Enzymes | Enzymes and prepared enzymes | 12% | 3507 |
| Contact Lenses and Spectacles | Contact lenses, spectacle lenses, and corrective spectacles | 12% | 9001 |
| Glands and Organo-Therapeutic Products | Glands for organo-therapeutic use, extracts of glands | 12% | 3001 |
| Diabetic Foods | Diabetic-specific foods | 12% | 2106 |
| Blood Glucose Monitoring System | Glucometers and test strips | 12% | 9027 |
| Medical Grade Oxygen | Medical-grade oxygen and hydrogen peroxide | 12% | 2804 |
| Anti-Inflammatory Drugs | NSAIDs like Ibuprofen and Diclofenac | 12% | 3004 |
| Gastrointestinal Agents | Medicines like Omeprazole and Pantoprazole | 12% | 3004 |
| Antiviral Medicines | Drugs like Oseltamivir (Tamiflu) | 12% | 3004 |
| Hormonal Treatments | Hormonal medications like Estrogen, Testosterone | 12% | 3004 |
| Antihypertensive Medicines | Blood pressure medications like Amlodipine, Lisinopril | 12% | 3004 |
Related Read: List of Exempted Goods & Services in 2025
How To Calculate GST on Medicines?
Calculating GST on medicines is simple. Use the formula:
GST Amount = (Price of Medicine × GST Rate) / 100 Final Price = Price of Medicine + GST Amount
Steps to Calculate GST
- Identify the GST rate applicable (e.g., 5%, 12%).
- Multiply the medicine’s base price by the GST rate.
- Divide the result by 100 to get the GST amount.
- Add the GST amount to the base price to get the final price.
For example, if a medicine costs ₹1,000 with a GST rate of 12% GST Amount = (1,000 × 12) / 100 = ₹120 Final Price = 1,000 + 120 = ₹1,120
How Does the GST Impact on the Healthcare Industry?
The introduction of GST has had mixed effects on the healthcare industry, impacting hospitals, patients, and pharmaceutical companies in different ways.
For hospitals, GST is not directly levied on healthcare services as they are exempt, but they face increased input costs. Since hospitals cannot claim input tax credits (ITC) on GST paid for goods and services like equipment, maintenance, and consumables, these costs are often passed on to patients, indirectly increasing healthcare expenses.
For patients, life-saving drugs and essential medicines are taxed at lower GST rates or exempt entirely, ensuring affordability. However, GST on non-essential drugs (12%), medical devices, and diagnostics has increased out-of-pocket expenses for certain treatments.
Pharmaceutical companies benefit from GST’s uniform tax structure, which reduces logistical complexities and eliminates cascading taxes. However, compliance requirements under GST can increase operational costs, particularly for smaller companies.
While GST simplifies taxation and increases transparency, its exemption for services and taxation of inputs creates a cost imbalance that adversely affects hospitals and patients. While the pharmaceutical sector gains efficiency, it may face higher taxes on certain products in the future.
Conclusion
In conclusion, the implementation of GST on medicine has brought about significant changes in the pharmaceutical sector, impacting pricing, compliance, and accessibility. With varying GST rates ranging from 5% to 18% for different types of medicines, including essential drugs and medical devices, understanding HSN codes is crucial for accurate tax filings and compliance. While the tax structure aims to streamline the system, it has also raised concerns over the affordability of medications, especially for consumers relying on life-saving drugs.
Despite these challenges, government exemptions and reliefs on essential medicines provide some relief to the public. As the pharmaceutical industry adapts to these changes, ongoing efforts to balance tax burdens with accessibility will be key in ensuring that GST on medicine does not adversely affect healthcare affordability.
FAQs About GST on Medicines
The GST rate on essential medicines is 5%, ensuring affordability for critical healthcare needs.
GST increases the cost of medicines, especially non-essential products, due to tax rates like 12% and 18% on certain pharmaceuticals.
HSN codes like 3003 and 3004 classify pharmaceutical products, determining the applicable GST rates (5%, 12%, or 18%).
Yes, life-saving medicines are generally exempt from GST, helping reduce the financial burden on consumers.
The pharmaceutical industry faces GST compliance challenges, including categorization of products and managing production cost increases due to higher tax rates.
GST rates for medicines vary: 5% for life-saving drugs, 12% for Ayurvedic and allopathic medicines, and 18% for non-essential products.
Pharmaceutical companies must file GST returns regularly and maintain proper invoices to comply with tax regulations and avoid penalties. What is the GST rate on essential medicines?
How does GST impact medicine pricing?
What are the HSN codes for medicines under GST?
Are life-saving medicines exempt from GST?
What challenges does the pharmaceutical industry face with GST?
How do GST rates vary for different types of medicines?
How can pharmaceutical companies ensure GST compliance?
