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

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).

The medicine gst rate is generally 5% under the revised GST structure, while specifically notified life-saving drugs are Nil-rated.

Medicines and pharmaceutical products generally fall under HSN Chapter 30 in the GST classification system. The gst on medicines depends on the specific product, HSN classification, and whether it is covered by a notified Nil-rate entry.

How to Calculate GST on Medicine

Let’s say you buy a strip of prescribed tablets for ₹100.

• GST @5% = ₹5
• Total Price = ₹105

Example: Supplement Taxed at 18%

If a nutritional supplement is classified under an HSN category attracting 18% GST and is priced at ₹100:

• GST @18% = ₹18
• Total Price = ₹118

Example: Medicine Taxed at 5%

If a medicine priced at ₹1,000 falls under the applicable 5% GST category and is not covered by a Nil-rate notification:

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

Specifically notified life-saving drugs may attract Nil GST under the revised GST structure.

GST Exemptions and Concessional Rates on Medicines

Not all medicines are taxed at the same rate. Certain specifically notified medicines and healthcare products are Nil-rated, while other medicines generally attract 5% GST.

• Contraceptives - Nil GST
• Human blood and its components - Nil GST
• Specifically notified life-saving drugs and medicines - Nil GST
• Oral Rehydration Salts (ORS) - 5% GST
• Diagnostic kits and reagents - 5% GST

The GST treatment depends on the specific medicine or healthcare product and its applicable HSN classification. Only specifically notified products qualify for Nil GST under the applicable GST provisions.

GST on Ayurvedic and Herbal Medicines

GST on Ayurvedic, herbal, and homeopathic products depends on whether the product is classified as a medicinal formulation, health supplement, cosmetic, or another category under GST.

• Ayurvedic, Unani, Siddha and homeopathic medicines: Generally attract 5% GST when classified as medicaments under HSN 3003 or 3004.
• Herbal medicinal formulations: Generally attract 5% GST when they qualify as drugs or medicines under the applicable HSN classification.
• Herbal supplements or wellness products: GST depends on the applicable HSN classification. Food or health supplements falling under applicable HSN 2106 classifications generally attract 5% GST under the revised structure.
• Other herbal or wellness products: Products classified as cosmetics or under other non-medicinal categories are taxed according to their respective HSN classification.

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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 subject to GST. Under the revised GST structure effective from 22 September 2025, applicable medical supplies are taxed based on their specific classification.

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. Under the revised structure, the gst rates on medicines are generally 5%, while specifically notified life-saving drugs and medicines are Nil-rated.

For businesses, understanding the applicable GST rate, HSN classification, and Input Tax Credit provisions helps manage compliance and costs, while consumers can better understand the tax impact on their medicine purchases.