What is the GST on Medicines?

GST on medicines is levied at 0%, 5%, 12%, or 18%, depending on the type of medicine or pharmaceutical product, including life-saving drugs, general medicines, and medical devices or equipment. However, some essential medicines and medical supplies are exempt from GST.

Related Read: List of Goods and Services Exempt Under GST

GST on Medicines: Latest News and Updates in 2024

As per 54th GST Council Meeting, a significant recommendation was made by the Finance Minister to reduce the Goods and Services Tax (GST) rate on specific cancer drugs.

Name of the Cancer Drugs

HSN Code

Old GST Rate

New GST Rate

Cancer drugs such as Trastuzumab Deruxtecan, Osimertinib, and Durvalumab 9804 12% 5%

GST Exempt Medicines and Medical Supplies List

Certain essential medicines and medical supplies are exempt from GST, meaning they fall under the Nil GST rate category. These exemptions are primarily in place to ensure that life-saving drugs and critical medical supplies remain affordable and accessible to the general public.

The following are some medicines and pharmaceutical products exempted under GST.

Category

Products

GST Rate

HSN Code

1. Essential Medicines
  • Human blood and its components
0% 3002
2. Vaccines
  • Vaccines exclusively used for polio eradication (Pulse Polio Program)
0% 3002
3. Organs and Body Parts
  • All human organs for transplant, including kidney, liver, heart
0% 3006
4. Contraceptives
  • Contraceptives and other devices used for family planning
0% 3006
5. Medical Supplies
  • Any medicinal supplies used in critical care or essential medical services that are notified for exemption
0% 3004
6. Sanitary Products
  • Sanitary napkins and tampons
0% 9619

5 Percent GST on Medicines and Other Medical Supplies in India

A 5% GST rate applies to a broad category of medicines and medical supplies. This lower tax rate balances the need for government revenue to make essential medicines affordable.

The following is the list of medicines and other medical supplies that attract a 5% GST rate.

Category

Products

GST Rate

HSN Code

1. Vaccines and Diagnostic Kits
  • Animal or human blood vaccines
  • Diagnostic kits for the detection of all types of hepatitis
  • COVID-19 diagnostic test kits
  • Influenza Vaccine
  • BCG vaccine
5% 3002
2. Medicines and Injections
  • Insulin
  • Oral rehydration salts
  • Desferrioxamine injection or deferiprone
  • Cyclosporin
  • Dopamine, Penicillamine, Protamine (and other specified drugs in List 1 of central excise notification 12/2012)
  • Streptomycin, Pyrazinamide, Hydrocortisone, Quinine (and other specified drugs in List 2 of central excise notification 12/2012)
5% 3003, 3004
3. Assistive and Rehabilitation Devices
  • Artificial limbs
  • Orthopedic appliances (including crutches, surgical belts, and trusses)
  • Parts of wheelchairs, tricycles, braillers, crutches, and walking frames
  • Assistive devices and rehabilitation aids for the disabled (including braille writers, electronic aids like sonic guides, braille paper, and cochlear implants)
5% 9021, 8714, 9018
4. Medical Equipment
  • Artificial kidneys
  • Disposable sterilized dialyzer or micro barrier of artificial kidney
  • Ostomy Appliances
  • Coronary stents/stent systems for use with cardiac catheters
5% 9018, 9021
5. Other Essential Products
  • Medicaments used in biochemical systems not bearing a brand name
  • Milk food for babies
5% 3004, 1901

 

12 Percent GST on Medicines and Other Medical Supplies in India

The 12% GST rate is typically applied to specialized medical and pharmaceutical supplies that are not classified as essential but are still widely used in the healthcare industry.

The following is the list of medicines and other medical supplies that attract a 12% GST rate.

Category

Products

GST Rate

HSN Code

1. Blood and Immunological Products
  • Animal blood for therapeutic, prophylactic, or diagnostic uses
  • Antisera and other blood fractions and modified immunological products
12% 3002
2. Toxins and Microorganism Cultures
  • Toxins, cultures of microorganisms (excluding yeasts) and similar products
12% 3002
3. Mixed Medicaments
  • Medicaments comprising two or more constituents that have been mixed for therapeutic or prophylactic uses, not in measured doses or retail sale (includes ayurvedic, homeopathic, Unani, Siddha, or biochemical systems medicines)
12% 3003
4. Retail Medicaments
  • Medicaments comprising mixed or unmixed products for therapeutic or prophylactic uses, in measured doses or forms or packings for retail sale (includes ayurvedic, homeopathic, Unani, Siddha, or biochemical systems medicines)
12% 3004
5. Wadding and Bandages
  • Wadding, bandages, gauze, and similar articles, impregnated or coated with pharmaceutical substances, for retail sale for surgical, medical, dental, or veterinary purposes
12% 3005
6. Pharmaceutical Goods
  • Pharmaceutical goods specified in Note 4 (includes sterile surgical catgut, sterile tissue adhesives, sterile laminaria tents, etc.)
12% 3006
7. Tooth Powder
  • Tooth powder
12% 3306
8. Feeding Bottles and Nipples
  • Feeding bottles and nipples of feeding bottles
12% 3924
9. Rubber Gloves
  • Surgical rubber gloves or medical examination rubber gloves
12% 4015
10. Medical Instruments and Appliances
  • Instruments and appliances used in surgical, medical, dental, or veterinary sciences (includes scintigraphic apparatus, electro-medical apparatus, and sight-testing instruments)
12% 9018
11. Mechano-Therapy and Breathing Appliances
  • Mechano-therapy appliances, massage apparatus, ozone therapy, oxygen therapy, artificial respiration, aerosol therapy apparatus
12% 9019
12. Breathing Appliances and Gas Masks
  • Breathing appliances and gas masks, excluding protective masks without replaceable filters or mechanical parts
12% 9020
13. X-ray Products
  • Photographic film and plates for X-rays for medical use
  • X-ray machines and similar apparatus for surgical, medical, dental, or veterinary uses
12% 3701, 9022
14. Other Drugs and Medicines
  • Other drugs and medicines intended for personal use
12% 3004
15. Enzymes
  • Enzymes and prepared enzymes
12% 3507
16. Contact Lenses and Spectacles
  • Contact lenses, spectacle lenses, and corrective spectacles
12% 9001
17. Glands and Organo-Therapeutic Products
  • Glands and other organs for organo-therapeutic use, extracts of glands or their secretions
12% 3001
18. Diabetic Foods
  • Diabetic foods
12% 2106
19. Blood Glucose Monitoring System
  • Blood glucose monitoring system (glucometer) and test strips
12% 9027
20. Medical Grade Oxygen
  • Medical grade oxygen, medical grade hydrogen peroxide
12% 2804
21. Anti-Inflammatory Drugs
  • Non-steroidal anti-inflammatory drugs (NSAIDs) like Ibuprofen, Diclofenac
12% 3004
22. Gastrointestinal Agents
  • Medicines for gastrointestinal disorders like Omeprazole, Pantoprazole
12% 3004
23. Antiviral Medicines
  • Antiviral drugs like Oseltamivir (Tamiflu)
12% 3004
24. Hormonal Treatments
  • Hormonal medications like Estrogen, Testosterone, and related treatments
12% 3004
25. Antihypertensive Medicines
  • Blood pressure medications like Amlodipine, Lisinopril
12% 3004

18 Percent GST on Medicines and Medical Supplies in India

An 18% GST is applied to certain non-essential medical equipment and supplies, including advanced diagnostic tools, surgical instruments, and some medical devices. This higher tax rate aims to generate revenue from items not essential for basic healthcare but important for advanced treatments. Consequently, hospitals and healthcare providers face increased costs for such equipment, which may result in higher expenses for patients.

The following is the list of medicines and other medical supplies that attract a 18% GST rate.

Category

Products

GST Rate

HSN Code

1. Tobacco Cessation Aids
  • Products for oral or transdermal application containing nicotine, intended to assist in tobacco use cessation
18% 2403
2. Hygienic and Pharmaceutical Articles
  • Hygienic articles such as teats, hot water bottles, ice bags, etc.
  • Preparations for oral or dental hygiene (including dental floss) sold in individual retail packages
18% 3924, 3306
3. Medical and Surgical Furniture
  • Surgical, medical, dental, or veterinary furniture (e.g., operating tables, hospital beds, examination tables) with mechanical fittings
  • Dentists’ chairs, barbers’ chairs, etc.
18% 9402
4. Personal Care Items
  • Razors and razor blades
  • Organic surface-active products and preparations for washing the skin, whether or not containing soap
18% 8212, 3401
5. Measurement Instruments
  • Infrared thermometers, pyrometers, barometers, psychrometers, and hygrometers
18% 9025
6. Diagnostic Products
  • Diagnostic reagents and kits (not falling under lower GST rates)
18% 3002
7. Bandages and Dressings
  • Bandages, dressings, and similar articles not covered under lower GST rates
18% 3005
8. Dental Products
  • Dental materials such as filling compounds and restorative materials
18% 3306
9. Laboratory Supplies
  • Laboratory glassware and equipment used for medical testing and diagnosis
18% 7013
10. Contact Lens Solutions
  • Solutions and cleaners for contact lenses
18% 3307
11. Medical Services
  • Health and medical services provided by clinics and hospitals that are not exempt from GST
18% N/A

GST on Medicines Used During Hospitalization

Initially, there was some confusion regarding the application of GST on medicines and other medical consumables used during hospitalization (in-patient treatment).

To clarify this, the Authority for Advance Rulings (AAR) in Kerala ruled that medications, implants, and other consumables (such as diagnostic supplies and surgical equipment) used during hospitalization are subject to nil GST. According to the AAR, these items are considered part of the composite supply of healthcare services, which is exempt from GST. This ruling applies to treatments provided by all registered hospitals, clinics, and physicians across India.

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 has been applied with effect since 18th July 2022.

Any medical services rendered in the following ways will attract a nil or 0% GST rate:

  • Use of Intensive Care Unit (ICU) Critical Care Unit (CCU) Intensive Cardiac Care Unit (ICCU) or Neonatal Intensive Care Unit (NICU) rooms.
  • Health care services by a clinical establishment, or an authorized 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 Ayurvedic Medicines

The GST rate on Ayurvedic medicines is typically 12%, aligning with the rate for other non-essential pharmaceutical products. This tax rate applies to various Ayurvedic products, including herbal supplements, medicinal oils, and traditional remedies. 

5% GST on Pure Ayurvedic Medicines

Traditional Ayurvedic medicines that are composed entirely of natural ingredients, such as herbs and minerals, fall into this category. These formulations adhere strictly to classical Ayurvedic texts and are typically unbranded and non-patented. Given their importance in maintaining health, they are taxed at a lower rate of 5%.

12% GST on Proprietary Ayurvedic Medicines

This category includes Ayurvedic products marketed under specific brand names that may incorporate modern ingredients or proprietary blends, diverging from traditional recipes. These products are considered less essential than purely traditional formulations, resulting in a higher GST rate of 12%.

How to Calculate GST on Medicines?

Calculating GST on medicines is a straightforward process that involves the following steps:

STEP 1: Identify the Applicable GST Rate

Determine the specific GST rate for the medicine. Essential medicines typically attract a 5% GST rate, while other categories may be taxed at 12%.

STEP 2: Determine the Base Price

Obtain the base price of the medicine before GST is added. This is the price set by the manufacturer or distributor.

STEP 3: Calculate the GST Amount

Use the following formula to calculate the GST amount: 

GST amount = Base price × (GST rate / 100​)

STEP 4: Calculate the Final Price

Add the GST amount to the base price to determine the final price of the medicine.

Example:

If the base price of a medicine is Rs. 200 and the GST rate is 5%, the calculation would be:

GST amount = Rs. 200 × (5/100) = Rs. 10

Final price = Rs. 200 + Rs. 10 = Rs. 210

GST on Medicines: Pre GST vs Post GST

Particulars

Pre-GST (Rs.)

Post-GST (Rs.)

Cost of manufacturing of one pack of XYZ tablets (A) 120 120
Central Excise Duty (CED) at 5% on 60% of MRP (B) 3.43
VAT at 5% (On A+B) 6.53
GST at 5% 2.4
Final Sale Price 130 124.4

Analysis:

  • Pre-GST: The total tax burden on the medicine was 8.93% (5% CED + 5% VAT).
  • Post-GST: The GST rate on medicines was maintained at 5%, resulting in a slightly lower overall tax burden.

Impact of GST on the Healthcare Industry

The introduction of GST has had a profound impact on the healthcare industry in India. By replacing a complex web of taxes with a unified GST system, the overall cost structure of medicines and medical supplies has become more transparent.

However, the impact varies across different segments of the industry:

1. Patients

For patients, particularly those requiring long-term medication, the GST has led to a marginal increase in the cost of certain medicines. However, the exemption on life-saving drugs helps mitigate this impact.

2. Hospitals

Hospitals may experience higher costs due to the 18% GST on advanced medical equipment, potentially leading to higher charges for patients undergoing specialized treatments.

3. Pharmaceutical Companies

For pharmaceutical companies, the uniform tax structure has simplified compliance but also necessitates careful pricing strategies to remain competitive.

Frequently Asked Questions (FAQs)

1. Are life-saving drugs exempt from GST?

Yes, life-saving drugs are generally exempt from GST to ensure they remain affordable for patients.

2. What GST rates apply to medical equipment like ventilators and surgical instruments?

Medical equipment such as ventilators and surgical instruments are typically taxed at an 18% GST rate.

3. Are there any GST exemptions for healthcare services or medical supplies?

Essential healthcare services are exempt from GST, and some medical supplies like life-saving drugs also fall under the Nil GST rate category.

4. Can healthcare providers claim input tax credit (ITC) on the GST paid on medicines?

Yes, healthcare providers can claim ITC on the GST paid on medicines, provided they are not offering GST-exempt services.

Write A Comment