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GST Rate on Medicines and Other Pharmaceuticals

Updated on: Jan 12th, 2023

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21 min read

In this article, we discuss the GST rate on medicines, the impact of GST on medicines in India, GST on medical services, GST on medical equipment, GST on hospitalisation charges, and more. The GST levy on pharmaceutical products can range between different tax rates, i.e. Nil, 5%, 12% and 18%. The lowest rate typically applies to life-saving drugs and vaccines, whereas the 18% rate applies to products such as nicotine gum. 

NIL GST Rate on Medicines and Medical Goods

  • Human blood and its components by products used in medicine
  • All kinds of contraceptives
  • Sanitary napkins or tampons

5% GST Rate on Medicines and Medical Goods

The following are some of the medical products on which 5% GST is levied. This list is not exhaustive.

  • Animal or human blood vaccines
  • Insulin
  • Oral rehydration salts
  • Diagnostic kits for detection of all types of hepatitis
  • Desferrioxamine injection or deferiprone
  • Cyclosporin
  • Medicaments used in biochemic systems and not bearing a brand name
  • Drugs or medicines including their salts and esters and diagnostic test kits, specified in List 1 of the central excise notification 12/2012 such as Dopamine, Penicillamine, Influenza Vaccine, Protamine, BCG vaccine, amongst 200+ other specified drugs
  • Formulations manufactured from bulk drugs specified in List 2 of the central excise notification 12/2012 such as Streptomycin, Pyrazinamide, Hydrocortisone, Quinine, amongst 20+ other specified drugs
  • Artificial kidneys
  • Disposable sterilized dialyzer or micro barrier of artificial kidney
  • Artificial limbs
  • Orthopaedic appliances that include crutches, surgical belts and trusses; splints and other fracture appliances; artificial parts of the body
  • Parts of wheelchairs, tricycles, braillers, crutches, walking frames, etc.
  • Assistive devices, rehabilitation aids and other goods for disabled, specified in List 3  of the central excise notification 12/2012 such as braille writers and braille writing instruments, canes, electronic aids like the sonic guides, braille paper, artificial electronic ears (cochlear implants), amongst 20+ other specified goods
  • Coronary stents/stent systems for use with cardiac catheters
  • Ostomy Appliances
  • Milk food for babies
  • COVID-19 diagnostic test kits

12% GST Rate on Medicines and Medical Goods

The following are some of the medical products on which 12% GST is levied. This list is not exhaustive.

  • Animal blood for therapeutic, prophylactic or diagnostic uses
  • Antisera and other blood fractions and modified immunological products
  • Toxins, cultures of microorganisms (excluding yeasts) and similar products
  • Medicaments comprising two or more constituents which have been mixed together for therapeutic or prophylactic uses (excluding goods under headings 30.02, 30.05 and 30.06), not in measured doses or forms or packings for retail sale. This includes ayurvedic, homoeopathic, unani, siddha, or biochemic systems medicaments. 
  • Medicaments (excluding goods under headings 30.02, 30.05 and 30.06) comprising mixed or unmixed products for therapeutic or prophylactic uses, in measured doses or forms or packings for retail sale. This includes ayurvedic, homoeopathic, unani, siddha, or biochemic systems medicaments.
  • Wadding, bandages, gauze, and similar articles, impregnated or coated with pharmaceutical substances, for retail sale for surgical, medical, dental or veterinary purposes.
  • Pharmaceutical goods specified in Note 4 such as sterile surgical catgut, sterile tissue adhesives for surgical wound closure, sterile laminaria and sterile laminaria tents, etc.
  • Tooth powder 
  • Feeding bottles and nipples of feeding bottles
  • Surgical rubber gloves or medical examination rubber gloves
  • Instruments and appliances used in surgical, medical, dental or veterinary sciences. This includes scintigraphic apparatus and other electro-medical apparatus and sight-testing instruments. 
  • Mechano-therapy appliances; psychological aptitude-testing apparatus; massage apparatus; ozone therapy, oxygen therapy, artificial respiration or other therapeutic respiration apparatus, and aerosol therapy apparatus.
  • Breathing appliances and gas masks, excluding protective masks having neither replaceable filters nor mechanical parts. 
  • Photographic film and plates for x-rays for medical use
  • X-ray machines, and other similar apparatus used for surgical, medical, dental or veterinary uses. 
  • Other drugs and medicines intended for personal use
  • Enzymes and prepared enzymes
  • Contact lenses; spectacle lenses and corrective spectacles
  • Glands and other organs used for organo-therapeutic use, and extracts of glands or other organs or of their secretions for the same purpose
  • Diabetic foods
  • Blood glucose monitoring system (glucometer) and test strips 
  • Medical grade oxygen, medical grade hydrogen peroxide, etc.

18% GST Rate on Medicines and Medical Goods

The following are some of the medical products on which 18% GST is levied. This list is not exhaustive.

  • Products for oral or transdermal application or application otherwise containing nicotine  and intended to assist tobacco use cessation
  • Hygienic or pharmaceutical articles such as teats, hot water bottles, Ice bags, etc.
  • Preparations for oral or dental hygiene and dental floss, sold in individual retail packages
  • Surgical, medical, dental or veterinary furniture such as operating tables, hospital beds, examination tables, etc., with mechanical fittings; dentists' chairs; barbers' chairs, etc.
  • Razors and razor blades
  • Organic surface-active products and preparations for washing the skin, whether or not containing soap
  • Infrared thermometers, pyrometers, barometers, psychrometers and hygrometers.

28% GST Rate on Medicines and Medical Goods

No pharmaceutical products or medicines are taxed at 28% GST. 

You can use our HSN code finder to find the HSN code on medicines and medical goods.

GST on Medical Services

All Non-Intensive Care Unit (ICU)/Critical Care Unit (CCU)/Intensive Cardiac Care Unit (ICCU)/Neonatal Intensive Care Unit (NICU) room rents in a hospital or clinical establishment exceeding Rs.5,000 per day will be liable to GST at 5% (without input tax credit). It applies with effect from 18th July 2022.

Any medical services rendered by the following ways will attract a nil GST rate:

  • Use of Intensive Care Unit (ICU) or Critical Care Unit (CCU) or Intensive Cardiac Care Unit (ICCU) or Neonatal Intensive Care Unit (NICU) rooms.
  • Health care services by a clinical establishment, or an authorised medical practitioner or para-medics, except for renting of rooms, other than the above, where the room charges do not exceed Rs.5,000 per day, to a person receiving such health care services. 
  • Transportation of a patient in an ambulance, other than the services specified above.

GST on Hospitalisation

The Authority of Advance Ruling (AAR) in Kerala had ruled in 2017 that the supply of medicines, surgical items, implants, stents, and other consumables to a patient during hospitalisation will be treated as a composite supply and exempted as per entry in S.No.74 of Notification 12/2017 - Central Tax (Rate) dated 28th June 2017. In June 2022, the Tamil Nadu Authority for Advance Ruling issued a similar ruling.

Impact of GST on medicines

Medicines fall under Chapter 30 and are liable for excise duty at 6% on 65% of MRP when supplied by a pharmaceutical company. Some medicines were exempt from excise duty. Certain area-based excise duty exemptions were also available. The inputs required for manufacturing attracted 12.5% excise duty. Due to this inverted duty structure, there was an accumulation of CENVAT credit. Additionally, VAT at 4% was charged on the sale of medicines by producers and pharmacies. 

The table below illustrates the change in the price of medicines pre and post GST:

Particulars

Pre-GST (Rs)

Post GST (Rs)

Cost of manufacturing of one pack of XYZ tablets (A)

100

100

Excise duty at 6% on 65% of MRP (B)

[((A)*65%)/106]*6%

3.9

VAT at 4% (On A+B)

4.16

GST at 12%

5/12

Final sale price

108.06

105/112

The average price of medicine remains almost the same in comparing scenarios before GST and upon implementing GST.

Some of the other impacts on the price of medicines post implementation of GST are:

Reduction in the overall cost of technology – Under the previous regime, the healthcare sector’s machinery was very costly. Also, the duty charged on the same was not allowed as a tax credit. However, under GST, the IGST component will be allowed as a tax credit.

Improvisation of operational efficiency – Previously, the pharmaceutical industry attracted eight different types of taxes. But, GST has merged all these taxes into one, thereby removing the cascading impact of many taxes. GST will also rationalise the supply chain, thereby improving operational efficiency.

What is the value of supply to compute GST on medicines?

As per GST, the transaction value is the value of supply. The transaction value is the price paid or payable for the supply of goods or services or both, where the supplier and the recipient are not related parties, and the price is the sole consideration for the supply.

Discounts – As per Section 15(3) of the CGST Act, 2017, the discount can be deducted from the value of supply if given before or at the time of the supply if such discount has been recorded in the invoice of such supply.

Distribution of free samples – The input tax credit on these samples should be reversed as no tax is paid at the time of distributing such samples to the physician.

GST on the import of pharmaceuticals

The import of medicines attracts IGST and customs duty. The following is the bifurcation of taxes applicable:

  • Basic customs duty – 10% on assessable value for customs duty
  • Social welfare surcharge – 10% on BCD
  • IGST – 5%/12%/18% on the value after adding both the assessable value for customs duty and the basic customs duty and social welfare surcharge

GST on expired medicines or the return of drugs

If medicines reach the expiry date without being sold, then the same is returned to the manufacturer via the supply chain. Here, the retailer or wholesaler can opt for any of the two options below:

  1. Treating the returned goods as a fresh supply – In this case, the wholesaler will destroy the expired goods, and the return of expired goods will be recorded as purchases by the wholesaler. ITC availed on such goods will be reversed by the manufacturer because no ITC will be available on such goods as they are finally destroyed.
  2. Issue of a credit note for the returned goods – The supplier can adjust the tax liability only if ITC has not been availed by the person returning the expired medicines. In case ITC has been availed, the same will have to be reversed.

Place of supply with regard to certain medical services

With effect from 1 October 2019, the place of supply of services shall be the location of the recipient of services, for the export of research and development services by a person in the taxable territory to a non-taxable territory under contract, related to the pharmaceutical sector of the following:

  1. Integrated discovery and development
  2. Integrated development
  3. Evaluation of the efficacy of new chemical/ biological entities in animal models of disease
  4. Evaluation of biological activity of novel chemical/ biological entities in in-vitro assays
  5. Drug metabolism and pharmacokinetics of new chemical entities
  6. Safety Assessment/ Toxicology
  7. Stability Studies
  8. Bioequivalence and Bioavailability Studies
  9. Clinical trials
  10. Bio analytical studies

Frequently Asked Questions (FAQs)

  1. How to calculate GST on medicines?

To calculate GST on medicines, please refer to the table above under the section ‘Impact of GST on medicines’.

  1. How much GST on medicine?

The GST rate on medicine varies on the type of drug, but is typically at 5% or 12%. You can refer to the rate-wise lists above for better understanding.

  1. GST rate on ayurvedic medicine

The GST rate on ayurvedic medicine is 12%.

  1. GST on homoeopathic medicine

The GST rate on homoeopathic medicine is 12%.

  1. GST on medical products

The GST rate on medical products is 5%, 12% or 18%. You can refer to the rate-wise lists above for better understanding.

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Quick Summary

The article discusses GST rates on medicines, services, and equipment in India. It covers rates ranging from nil to 18%. Impact of GST on healthcare includes operational efficiency. Questions could be on calculating GST on medicines, ayurvedic medicine GST rate, homoeopathic medicine GST rate.

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