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 medicine refers to the Goods and Services Tax levied on pharmaceutical products in India. Rates range from 0% to 12% depending on the type of medicine. Essential life-saving drugs are exempt from GST, while most others attract a 5% rate, ensuring affordability and accessibility for the public.
With India’s pharmaceutical market projected to reach $130 billion by 2030, understanding GST on medicine is crucial for businesses and consumers. GST not only simplifies the tax structure but also ensures transparency in pricing, benefiting both manufacturers and patients.
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 | GST Rate |
| Life-saving drugs (e.g., HIV, TB) | 0% |
| Generic medicines | 5% |
| Vaccines | 5% |
| Patented and branded drugs | 12% |
| Supplements and vitamins | 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
| 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 |
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.
GST on Medicines FAQs
Which medicine has a 0 GST rate?
Life-saving medicines such as those for HIV, tuberculosis, malaria, and COVID-19 vaccines are taxed at 0% GST, ensuring affordability for critical treatments.
Which medicine has an 18% GST rate?
Medicines generally do not attract 18% GST. Most medicines fall under 0%, 5%, or 12% GST categories. However, specific healthcare products like medical-grade silicone items may attract 18%.
How much GST on paracetamol?
Paracetamol, classified as a generic medicine, attracts 12% GST as it falls under the category of retail medicaments for therapeutic or prophylactic use.
Is GST added on MRP for medicines?
No, GST is not added on the Maximum Retail Price (MRP) of medicines. The MRP already includes GST, and consumers pay the price printed on the packaging.
