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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 rates on medicines, explain the applicable HSN codes, and highlight how it affects consumers and pharmaceutical businesses.
Medicines are taxed at 5%, 12%, or 18% GST, depending on the type of drug and its classification. Life-saving drugs and vaccines typically fall under the lowest tax brackets, while other pharmaceutical items and formulations may attract higher rates.
| Type of Medicine | GST Rate |
|---|---|
| Life-saving drugs (e.g., HIV/AIDS, TB, cancer) | 5% |
| Most prescription medicines | 12% |
| Vitamins, supplements, and over-the-counter (OTC) products | 18% |
Medicines and pharmaceutical products are classified under HSN Chapter 30.
Here are common HSN codes:
| Product Description | HSN Code | GST Rate |
|---|---|---|
| Medicaments (used in specific diseases) | 3004 | 12% / 18% |
| Vaccines for human medicine | 3002 | 5% |
| Blood and plasma | 3002 | 5% |
| Ayurvedic & homeopathic medicines | 3003 | 5% / 12% |
Manufacturers, wholesalers, and retailers must mention the HSN code on their GST invoices and returns.
Let’s say you buy a strip of prescribed tablets for ₹100.
If it’s a life-saving drug priced at ₹1,000:
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Not all medicines are taxed. Some essential drugs and health products are exempt from GST, such as:
These items fall under the 0% GST category, helping keep healthcare affordable.
Manufacturers must clearly label these products with HSN codes and tax applicability.
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Pharmaceutical companies, chemists, and hospital pharmacies can claim ITC on GST paid on:
ITC helps reduce the overall tax burden for GST-registered entities and improves profitability.
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Some important medical supplies also attract GST:
| Item | GST Rate |
|---|---|
| COVID test kits | 5% |
| Syringes and needles | 5% |
| Thermometers and BP monitors | 12% |
| Glucometers | 12% |
| Surgical instruments and dressings | 12% |
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 12% 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 your bill better.
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.