---
title: "New GST for Medicines 2026: 5% Rate on Medicines, Drugs"
description: "New GST rate on medicines in 2026 is 5% on drugs, tablets, capsules and life-saving medicines. Busy ensures accurate GST billing on every sale and purchase."
canonical: "https://busy.in/gst-rates/medicines/"
author: "Nishant"
published: "2025-04-23T11:18:51.000Z"
category: "GST Rates"
---

-   Revised GST rates for medicines apply from **22 September 2025**, with most finished formulations attracting **5% GST** and specified life-saving drugs exempt or taxed at 0%.
-   Essential healthcare products such as specified drugs and contraceptives may be exempt from GST under applicable provisions.
-   Pharmaceutical businesses can claim eligible Input Tax Credit on business inputs, subject to GST conditions.
-   Medicines must carry applicable HSN codes on GST invoices, such as **HSN 3004 for medicaments** and **HSN 3002 for vaccines and blood products**.

# New GST on Medicines in India: Tax Rates, HSN Codes & What You Need to Know

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.

## **New GST Rate on Medicines in India: Category-Wise Breakdown**

The revised GST rates applicable from **22 September 2025** are provided below for common medicine categories (no compensation cess applicable).

## 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 | **5% (where classified as applicable pharmaceutical products)** | **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.

-   **GST @5% = ₹5**
-   **Total Price = ₹105**

For products taxed at 18% (such as applicable OTC products, supplements, or other classified items):

-   **GST @18% = ₹18**
-   **Total Price = ₹118**

If a life-saving drug is priced at ₹1,000 and falls under the applicable 5% GST category:

-   **GST @5% = ₹50**
-   **Total Price = ₹1,050**

Live Demo Available Today

## Scan Medicine Barcodes at Billing — No Manual SKU Entry

Trusted by 6,00,000+ Users

4.6 Google Rating

\* No credit card required

## **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 classified as a **medicinal formulation, health supplement, or another category under GST**.

-   **Unbranded herbal products:** GST depends on the product classification and applicable GST provisions.
-   **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 classified as health supplements rather than medicines.
-   **Homeopathic medicines:** Typically taxed at **5% GST** when sold as medicinal formulations.

**Explore a Free Demo of –**  [**Best Inventory Management Software For Small Business**](https://busy.in/accounting-software/inventory-management/)

## Input Tax Credit (ITC) for Medical Businesses

Pharmaceutical companies, chemists, and hospital pharmacies can  [**claim ITC**](https://busy.in/gst/what-expenses-can-be-claimed-as-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.

**Get a Free Trial –**  [**Best E Way Bill Software**](https://busy.in/accounting-software/auto-e-way-bill/)

## **GST on Medical Kits and Supplies**

Several medical kits, diagnostic devices, and healthcare supplies are subject to GST. Under the revised GST structure effective from **22 September 2025**, applicable medical supplies are taxed based on their specific classification.

| 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 | **5%** | **12%** |
| Glucometers | **5%** | **12%** |
| Surgical instruments and dressings | **5%** | **12%** |

These products are classified under applicable HSN codes based on the type of medical device or healthcare supply.

## **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 many critical and life-saving medicines are taxed at lower rates or exempt under applicable provisions, most finished pharmaceutical products attract **5% GST** based on their classification. For businesses, understanding applicable GST rates and Input Tax Credit provisions helps manage compliance and costs, while consumers can better understand the tax impact on their purchases.

## About the author

**Nishant**

I am a Chartered Accountant with more than five years of experience in the accounting field. My areas of expertise include GST, income tax, and audits. I am passionate about sharing knowledge through blogs and articles, as I believe that learning is a lifelong journey. My goal is to provide valuable insights and simplify financial matters for individuals and business owners alike.

## Frequently asked questions

### Are all medicines taxed under GST?

No. Some essential drugs are exempt from GST, while most other medicines attract **5% GST** based on their applicable classification.

### Can hospitals claim ITC on medicines?

Yes, if the hospital is GST-registered and sells medicines as part of taxable services.

### Is GST applicable on home delivery of medicines?

Yes, GST is charged on the medicine's value, regardless of delivery.

### Are Ayurvedic medicines taxed differently?

Branded Ayurvedic medicines attract 5%-18% GST; unbranded or traditional ones may be exempt.

### Can retailers claim ITC on medicine purchases?

Yes, if they are registered under GST and issue proper invoices for sales.

## Related articles

- [New GST on Skincare Products: Rate, Branding & Retail Pricing](https://busy.in/gst-rates/skincare-products/)
- [New GST on Industrial Machinery: Slabs, ITC & MSME Effect](https://busy.in/gst-rates/industrial-machinery/)
- [New GST on Restaurant Meals: Dine-in, Takeaway & Delivery Compared](https://busy.in/gst-rates/restaurant-meals/)
- [New GST on Kitchen Utensils: What’s Taxed and What’s Not?](https://busy.in/gst-rates/kitchen-utensils/)
- [New GST on Online Education: Rate, Exemptions & EdTech Impact](https://busy.in/gst-rates/online-education/)
- [New GST on Packaging Materials: Tax Implication Across Industries](https://busy.in/gst-rates/packaging-materials/)
- [New GST on Digital Marketing Services: Tax Rates & Input Credit Explained](https://busy.in/gst-rates/digital-marketing-services/)
- [New GST on Pesticides: Rates, Agri-Exemptions & Sector Impact](https://busy.in/gst-rates/pesticides/)
- [New GST on Butter: From Dairy to Dining – What You Pay](https://busy.in/gst-rates/butter/)
- [GST on Honey: Rate, Applicability & Industry Outlook](https://busy.in/gst-rates/honey/)