Under Article 21 of the Constitution of India, everybody has the right to live, and it is the duty of the government to provide life to its pupils. It includes ensuring the right to health and access to essential services, including healthcare and medicines. The government is obligated to create conditions to promote the well-being of its citizens and ensure their survival and better quality of life. In line with the constitutional duty, the introduction of GST (Goods and Service Tax) on medicines plays a crucial role in ensuring the accessibility and affordability of healthcare. Before GST, medicines were taxed through a combination of central and state taxes. Though, there was no central excise duty on the manufacturing of pharmaceuticals and some essential drugs were exempted from tax duty or taxed at a significantly lower rate. At the state level, medicines were taxed with rates ranging between 4% and 12.5%, depending on the state. In the pharmaceutical industry, GST has unified all the ancillary complex tax and has paved the way for the well-being of pupils in India.
GST is applicable on the medicines but with specific provisions, exemptions, and varying tax rates on the basis of their classification. In this blog, we will understand GST rate on medicines and the HSN (Harmonized System of Nomenclature) code for pharma products is crucial for manufacturers, suppliers, and consumers alike.
GST Rates for Medicines and Pharmaceutical Products
Goods and services are classified into the tax slabs of 0%, 5%, 12%, 18%, and 28%. Medicines and other healthcare products are considered as essential goods, and therefore, the government has laid down GST rates on the medicines depending on their classification.
1. GST Rate of 5%:
The rate is applicable to life-saving medicines and medical goods. It includes those type of medicines that are used for chronic diseases, antibiotics, vaccines, and other essential healthcare products. The 5% GST is applicable to items that are critical for public health to make sure that general public as access to these medicines without paying much amount of taxes.
Examples of drugs under 5% GST:
- Painkillers and fever reducers
- Insulin for diabetes management
- Vaccines
- Milk food for babies
- Antibiotics
- Artificial kidneys
- Artificial limbs
- Wheelchair’s parts
2. GST Rate of 12%:
There are several pharmaceutical products that do not fall under the essential category and they are subjected to a 12% GST rate. These are medicines and drugs that may not be urgently required but still play an important role in treating various health conditions.
Examples of drugs under 12% GST:
- Prescription medications not included in the essential list
- Over-the-counter medicines like cold and flu treatments
- Animal blood used for therapeutic or diagnostic purposes
- Diabetic food
- Ayurvedic Medicine
- Homoeopathic Medicine
3. GST Rate of 18%:
There are some category of high-end medicines that are used to treat rare diseases. These medicines require advance manufacturing processes and are associated with high research and development and is used for cancer, autoimmune diseases, rare genetic disorders and are subjected to 18% GST due to complexity of formulation, high cost of productions, and dependence on small population on it.
Examples of drugs under 18% GST:
- Cancer treatment medications
- Biopharmaceutical products
- Specialized medical equipment like infusion pumps
4. GST Rate of 28%:
GST rate of 28% applies to health supplements and cosmetic medicines. These products are not considered essential drugs and include products such as health tonics, nutritional supplements, and specific vitamins and minerals.
Examples of drugs under 28% GST:
- Health tonics and nutritional supplements
- Certain vitamins and minerals
Exemptions from GST on Medicines
Under the CGST Act of 2017, certain essential medicines and healthcare products are entirely exempted from GST. The main aim of exempting particular medicines is to make healthcare more accessible and affordable. These are mostly life-saving drugs, critical medical devices, and products that are vital for public health and well-being. It includes:
- Human Blood and its Components: Blood and blood components including plasma and serum used for medical treatments are exempted from GST. These components are used to treat patients with anemia or hemophilia, during surgery and trauma care.
- Medicines for Treating Life-Threatening Diseases: Medicines and drugs that are used to treat life-threatening diseases such as cancer, HIV/AIDS, Tuberculosis (TB), and other terminal illnesses are exempted from GST in certain cases. These drugs are expensive and essential for the treatment of patients. Therefore, exemption reduces the financial burden.
- Certain Medical Devices and Instruments: There are some devices and instruments which are used in life-saving treatment and are exempted from GST. It includes pacemakers, defibrillators, and dialysis machines, as well as other equipment required for surgeries and critical care.
HSN Code for Pharma Products
In India HSN- Harmonized System of Nomenclature Code for pharmaceutical products is part of the Goods and Services Tax (GST) and is governed by Central Goods and Services Tax Act, 2017 popularly known as CGST Act, 2017 and the Integrated Goods and Services Tax Act, 2017 popularly known as IGST Act, 207along with various GST Rules and Notifications.
Under GST, the HSN code is used for classification of for medicines and pharmaceutical products to ensure consistent and GST rate is applied.
Common HSN Codes for Pharmaceutical Products
| HSN Code | Applied on | Medicines/Drugs/Salts | GST Rate | ||
| 3003 | Medicaments (Except Narcotics) | Antibiotics, Hormones, Vaccines, Pain Relievers, etc. | 12% / 18% | ||
| 3003 10 | Antibiotics | Amoxicillin, Ciprofloxacin, Azithromycin, Doxycycline, Metronidazole | 12% | ||
| 3003 20 | Hormonal Medicaments | Testosterone, Estrogen, Insulin, Progesterone, Thyroxine | 12% | ||
| 3003 30 | Vaccines |
|
5% | ||
| 3003 90 |
|
Paracetamol, Omeprazole, Diclofenac, Metformin, Antipyretic & Analgesics | 12% | ||
| 3003 90 11 | Vaccines for Human Use | Influenza Vaccine, Typhoid Vaccine, Rabies Vaccine | 5% | ||
| 3003 90 19 | Other Vaccines | Canine Distemper Vaccine, Bovine Vaccine | 12% | ||
| 3004 | Medicinal Preparations (Unpacked) | Tablets, Capsules, Ointments, Creams, Syrups | 18% | ||
| 3004 10 | Antibiotics or Hormonal Medicaments | Azithromycin, Amoxicillin, Ciprofloxacin, Testosterone, Insulin | 18% | ||
| 3004 90 | Other Medicinal Preparations |
|
18% | ||
| 3005 | Wadding, Gauze, Bandages, etc. | Bandages, Surgical Dressings, Gauze, Cotton Wool | 12% | ||
| 3005 10 | Wadding & Gauze for Medical Use | Medical Gauze, Cotton Wadding, Sterile Dressings | 12% | ||
| 3005 90 | Other Medical Supplies |
|
|
||
| 3006 | Pharmaceutical Goods | Inhalers, Lotions, Potions, Tablets, Capsules | 18% | ||
| 3006 10 | Inhalation Medicaments | Salbutamol, Ipratropium Bromide, Fluticasone, Terbutaline | 18% | ||
| 3006 30 | Medicaments in Tablets/Capsules | Diclofenac, Paracetamol, Ibuprofen, Gabapentin, Metformin | 18% | ||
| 3006 90 | Other Pharmaceutical Products | Multivitamins, Antacids (Omeprazole), Anti-hypertensives (Losartan) | 18% | ||
| 3007 | Chemical Diagnostic Reagents | Pregnancy Kits, Blood Glucose Test Strips, Cholesterol Test Kits | 18% | ||
| 3007 10 | Reagents for Medical Use | Blood Grouping Kits, Pregnancy Test Kits, Serum Reagents | 18% | ||
| 3007 20 | Reagents for Testing Blood | Blood Glucose Test Strips, Hemoglobin Reagents | 18% | ||
| 3008 | Medicated Cosmetics & Toiletries | Medicated Shampoos, Antiseptic Creams, Antifungal Soaps | 18% | ||
| 3008 90 | Other Medicated Toiletries | Anti-dandruff Shampoos, Medicated Skin Creams, Gels for Acne Treatment | 18% | ||
| 3003 90 10 | Medicinal Products for Cancer Treatment | Methotrexate, Imatinib, Tamoxifen, Docetaxel, Paclitaxel | 5% | ||
| 3003 90 90 | Other Medicinal Products | Aspirin, Paracetamol, Ibuprofen, Loratadine, Cetirizine | 12% |
GST on Import of Medicines
When medicines are imported to India, Integrated Goods and Services Tax (IGST) is applied to them. The IGST rate varies between 5% to 18% depending on the type of medicine. In addition to IGST, customs duty is also levied on imported medicine and is calculated based on the transaction value of the medicine, including its cost, freight, and insurance. It is pertinent to note that IGST is only applied after custom duty is paid for goods, i.e.,
Total value of goods= Cost of Goods + Custom duty, IGST shall apply on the Total value of Goods.
And If imported medicines are later exported, the businesses can claim refund of IGST paid at the time of import.
GST on Import of Medicines
When medicines are exported from India, they are classified as zero-supply under GST i.e., no GST is charged on exported medicines and businesses can claim a refund of GST as ITC (Input Tax Credit) if they have paid GST on their purchases. It is pertinent to note that even though GST is not applied on export of medicines, businesses have to still report them in their GST Returns.
Conclusion
At last, the introduction of GST on medications and pharmaceutical items in India has provided much-needed clarity and efficiency to the healthcare sector. The healthcare supply chain is now simpler and more transparent thanks to the GST, which replaced the previous system of several state and central levies with a single tax structure. Vital medications are kept within reach of the public, and tax rates vary from 5% for life-saving medications to 28% for non-essential goods. Furthermore, healthcare is now more accessible to the general public due to exemptions for essential medications and medical equipment. As GST is an evolving subject, the pharmaceutical industry needs to keep an eye on changing rates and new government notifications to stay on top of compliance.
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FAQs
1. What is the GST rate on medicines in India?
The GST rate on medicines varies between 5%, 12%, 18%, and 28%, depending on the type of medicine and its classification.
2. What is the HSN code for pharmaceutical products?
Pharmaceutical products generally fall under Chapter 30 of the HSN code, with specific codes like 3003 for medicaments and 3004 for other types of therapeutic products.
3. Are medicines exempt from GST?
Some essential medicines, including those used for life-threatening diseases, may be exempt from GST.
4. Can pharma companies claim input tax credit (ITC) on medicines?
Yes, pharmaceutical companies can claim ITC on input goods used in the production of medicines.
5. Is the export of medicines subject to GST?
No, the export of medicines is exempt from GST, providing a competitive advantage to Indian pharma companies in the international market.
6. How does GST benefit consumers?
GST makes medicines more affordable by reducing the cascading effect of taxes and ensuring a more unified pricing structure across the country.
