New GST on Medicines in India: Tax Rates, HSN Codes & What You Need to Know
Quick Summary
- The new GST rates for medicines in India will start after September 22, 2025, with life-saving drugs taxed at 0% or 5%, most prescription medicines at 5%, and vitamins and OTC products at 18%.
- Essential drugs like oral rehydration salts and contraceptives are exempt from GST, making them more affordable.
- Medical businesses can claim input tax credit on GST paid for raw materials, packaging, and other operational costs, reducing their tax burden.
- HSN codes must be included on GST invoices for medicines, with common codes being 3004 for medicaments and 3002 for vaccines and blood products, all taxed at 5%.
When it comes to health, access to affordable medicine is essential. While most life-saving drugs are either exempt or taxed at a lower GST rate, not all medicines are treated equally under the Goods and Services Tax (GST) regime. In this article, we break down the GST on medicines, explain the applicable HSN codes, and highlight how it affects consumers and pharmaceutical businesses.
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New GST Rate on Medicines in India: Category-Wise Breakdown
The Government of India is updating GST rates effective after 22 September 2025. Below are the expected new GST rates for common medicine categories (no compensation cess).
New GST Rates on Medicines
| Type of Medicine | New GST Rate (After 22 Sept 2025) |
Old GST Rate (Before 22 Sept 2025) |
|---|---|---|
| Life-saving drugs (e.g., HIV/AIDS, TB, cancer) | 0% / 5% | 0% / 5% |
| Most prescription medicines | 5% | 5% |
| Vitamins, supplements, and over-the-counter (OTC) products | 18% | 18% |
(After 22 Sept 2025) 0% / 5%
(Before 22 Sept 2025) 0% / 5%
(After 22 Sept 2025) 5%
(Before 22 Sept 2025) 5%
(After 22 Sept 2025) 18%
(Before 22 Sept 2025) 18%
HSN Code for Medicines
Medicines and pharmaceutical products fall under HSN Chapter 30 in the GST classification system. Businesses dealing in pharmaceutical products must use the correct HSN codes when issuing GST invoices or filing returns.
| Product Description | HSN Code | GST Rate |
|---|---|---|
| Medicaments (used in specific diseases) | 3004 | 5% |
| Vaccines for human medicine | 3002 | 5% |
| Blood and plasma | 3002 | 5% |
| Ayurvedic & homeopathic medicines | 3003 | 5% |
How to calculate GST on Medicine
Let’s say you buy a strip of prescribed tablets for ₹100.
- If taxed at 18%, GST = ₹18
- Total Price = ₹118
If it’s a life-saving drug priced at ₹1,000:
- GST @5% = ₹50
- Total Price = ₹1,050
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GST Exemptions on Medicines
Not all medicines are taxed. Some essential drugs and health products are exempt from GST, such as:
- Oral rehydration salts (ORS)
- Contraceptives
- Diagnostic kits for specific diseases
- Certain bulk drugs used in manufacturing life-saving formulations
These items fall under the 0% GST category, helping keep healthcare affordable.
GST on Ayurvedic and Herbal Medicines
GST on Ayurvedic, herbal, and homeopathic medicines depends on whether the product is branded, packaged, or sold as a regulated medicinal formulation.
- Unbranded herbal products: Usually exempt from GST if sold without branding or therapeutic claims.
- Branded or packaged Ayurvedic medicines: Generally taxed at 5% GST when classified as medicaments under HSN 3003 or 3004.
- Herbal supplements or wellness products: May attract 18% GST if they are categorized as health supplements rather than medicines.
- Homeopathic medicines: Typically taxed at 5% GST when sold as medicinal formulations.
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Input Tax Credit (ITC) for Medical Businesses
Pharmaceutical companies, chemists, and hospital pharmacies can claim ITC on GST paid on:
- Raw materials and packaging
- Transportation and logistics
- Retail operations and utilities
ITC helps reduce the overall tax burden for GST-registered entities and improves profitability.
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GST on Medical Kits and Supplies
Several medical kits, diagnostic devices, and healthcare supplies are also subject to GST. Under the revised GST structure after 22 September 2025, most essential medical supplies fall under the 5% or 18% GST slabs, as the 12% slab has been removed.
| Item | New GST Rate (After 22 Sept 2025) |
Old GST Rate (Before 22 Sept 2025) |
|---|---|---|
| COVID test kits | 5% | 5% |
| Syringes and needles | 5% | 5% |
| Thermometers and BP monitors | 18% | 12% |
| Glucometers | 18% | 12% |
| Surgical instruments and dressings | 18% | 12% |
These products are typically classified under HSN Chapter 90 or 30, depending on the type of medical device or healthcare supply.
(After 22 Sept 2025) 5%
(Before 22 Sept 2025) 5%
(After 22 Sept 2025) 5%
(Before 22 Sept 2025) 5%
(After 22 Sept 2025) 18%
(Before 22 Sept 2025) 12%
(After 22 Sept 2025) 18%
(Before 22 Sept 2025) 12%
(After 22 Sept 2025) 18%
(Before 22 Sept 2025) 12%
Unique Features of BUSY Accounting Software for the Medicine Industry
- Batch-wise inventory management for expiry tracking and stock control.
- Expiry date-wise stock reports to avoid selling near-expiry or expired medicines.
- Drug license number recording for compliance with regulatory bodies.
- Salt/Composition tracking for each medicine item.
- Barcode-enabled billing for faster counter sales and inventory accuracy.
- MRP-based sales and purchase billing with margin control.
- Sales schemes and discount tracking for pharma trade promotions.
- Detailed party-wise sales reports for distributors and chemists.
- Breakage and return management for damaged or expired stock.
Final Thoughts
GST (Goods and Services Tax) on medicines has helped streamline the pharmaceutical tax structure in India, replacing earlier VAT and excise duties. While most critical and life-saving medicines are taxed at lower rates or exempted, general and OTC drugs attract 5% or 18% GST. For businesses, input tax credit helps manage costs, while for consumers, it’s important to be aware of tax rates to understand their bills better.
