GST Rate and Applicability on Medicines and Medical Supplies

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September 10, 2019

GST Rate on Medicines

GST (Goods & Services Tax) regime was introduced in India in July 2017 to become the single indirect tax on the supply of goods and services. Under GST, various medical supplies and medicines are taxed according to the different rate segments, as illustrated below.

While the most crucial medical supplies such as human blood have been kept free of tax, premium medicinal products, including the ones containing nicotine polacrilex, attract 18% GST. A more detailed list is given below.

As you may know, GST tax system consists of five different tax slabs  – Nil (0%), 5%, 12%, 18%, and 28%.

There are no medical supplies in the 28% slab. Let’s find out the applicable GST rate on medicines.

Medicines and Medical Supplies under 18% GST Slab

GST on the following pharmaceutical products is levied at the rate of 18%.

  • Nicotine polacrilex gum
  • hair care products (except for mehendi cones)
  • dental/oral hygiene products, including denture powders (excluding toothpowder) and fixative pastes, dental floss, etc. sold in retail packaging
  • Furniture used for dental, surgical, medical or veterinary purposes, including hospital beds, examination tables, operating tables, etc.

Recommended: Impact of GST on Healthcare and Pharmaceutical Industry

Medicines and Pharmaceutical Supplies in 12% GST Slab

Most of the general-purpose medicines and pharmaceutical preparations fall into this category of taxation under GST.

  • Various organs (& organ extracts) and glands (& gland extracts), in both dried or powdered forms, to be used for organo-therapeutic uses
  • Human/animal substances supplied to be used for prophylactic or therapeutic purposes
  • Heparin and various heparin salts
  • Animal blood to be used for diagnostic, therapeutic and prophylactic purposes
  • Toothpowder
  • Ayurvedic, Unani, Bio-chemic, siddha or homeopathic medicines and supplies for therapeutic/prophylactic use, must have been prepared using two or more elements
  • Atrial septal defect occlusion device/Patent Ductus Arteriosus
  • Animal blood preparations including antisera and other blood supplies and related immunological products
  • Medical products such as sterile surgical catgut, sterile tissue adhesives for surgical wound closure, sterile absorbable surgical/dental yarns, sterile luminaria, waste pharmaceuticals, sterile laminaria tents, etc.
  • Toxins, cultures of micro-organisms (excluding yeasts) and other related products made to be used for medical purpose
  • Diabetic food products, test strips and blood glucose monitoring equipment (glucometer)
  • Medical-purpose oxygen, hydrogen peroxide, and related supplies.
  • Bandage, wadding, gauge and similar items (coated/impregnated with pharmaceutical substances) along with dressings, poultices and adhesive plasters made for use in veterinarian, dental, surgical or medical procedures 
  • Photographic film/plates for X-rays

Medicines and Medical Supplies under 5% GST Slab

Besides Nil rate, 5% is the lowest GST rate on medicines, medical supplies and products. It is applicable to the following pharmaceutical supplies:

  • Hepatitis diagnostic kits (all types)
  • Cyclosporin
  • Vaccines for human/animal blood
  • Deferiprone or desferrioxamine injection
  • Oral rehydration salts
  • Insulin
  • Bio-chemic Medicaments (inclusive of veterinary medicines) used without brand name
  • Ayurvedic, Unani, Homeopathic, Siddha or Bio-chemic medicaments manufactured according to the formulations prescribed in appropriate pharmacopoeia (As per the First Schedule of the Drugs and Cosmetics Act, 1940)
  • Artificial kidneys, disposable micro barriers or sterilized dialyzers used for artificial kidneys
  • Artificial limbs, crutches, wheelchairs, walking frames, etc.
  • Medicinal Formulations manufactured from bulk drugs specified in List 2 of central excise notification 12/2012
  • Medicines/drugs, their esters and salts and diagnostic test kits (specified in List 1 of central excise notification 12/2012)
  • Coronary stents/stent systems made for use with cardiac catheters

Also Read: GST Impact on Various Sectors in India

Nil (0%) GST Rate Medical Products

Only a couple of pharmaceutical items are kept under zero GST category:

  • Human blood and components for use in medicine
  • All types of contraceptive products
  • Medicines and related items, including diagnostic supplies and surgical equipment, used during hospitalization

GST on Medical Services

GST is also applicable to various health care services provided either to animals or humans. For now, the GST rate on all kinds of healthcare and medical services is nil, given that the services are levied from an authorized medical practitioner, licensed medical or paramedical clinic. These include the medical services provided while carrying a patient in an ambulance.

Along with healthcare services, any medicines and medical supplies provided during hospitalization will also be free of GST.

GST Impact on Medicines and Pharmaceutical Products

Due to the removal of cascading of taxes (excise duty over VAT), taxation on medical supplies has become easier under the GST regime. However, there has been no major change in terms of cost, because the overall tax rate on most of the medical products remains 5%, nearly the same as the previous regime.

Other than that, the benefits like excise duty removal on dietary supplement products, input tax credit, reduced warehousing needs (& cost), etc. are expected to benefit both manufacturers and customers in the long term.

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