Applicable GST Rate on Medicines and medical supplies
Hemlata Khandenwal / 2020-05-11 08:20:27

Short information about the GST rates on Medicines and medical supplies:

Currently the GST rate applicable to all types of contraceptive drugs is zero, including human blood and its derivatives.

The highest GST rate i.e. 18% on medicines applies only to products with nicotine gum.

The lowest GST rate of 5% (other than NIL GST rate) applicable to pharmaceutical products designated as "life-saving drugs" including oral rehydration salts, vaccines, as well as drugs used for

  • Treatment of diabetes,
  • Treatment of HIV – AIDS
  • Tuberculosis & Malaria, etc.

As of now, no pharmaceutical products have been shown to have the highest 28% GST rate. Read the article to know about the GST rate applicability on medical products in detail.

What are the Pharmaceutical products and services covered under the Nil GST rate?

NIL GST Rate Pharmaceutical Products

Zero GST on drugs currently only applies to the following products:

  • Human blood and its components are used in medicine
  • All types of contraceptive products

Nil GST on medical services.

Health care services for both human and animal (veterinary services) are included in the GST Act. Under current regulations, there is zero GST on health care services provided by an authorized medical practitioner, licensed medical or paramedical clinic.

The applicable rate of GST on any type of medical services that provides an ambulance while transporting the patient is same.

In the case of veterinary health services provided to birds/animals in authorized clinics, the applicable GST rate is also zero.

NIL GST on medicines used during hospitalization.

At the starting of GST, there was confusion regarding GST charges on medicines and other medical consumables used at the time of admitting in hospital for treating the patient.

In response to a question on the issue, the Authority's Rule (AAR) in Kerala states that medicines, implants, and other consumables used during hospitalization (such as diagnostic supplies and surgical instruments) are supplied GST will be facilitated.

According to AAR, these are to be included as part of the overall supply included as part of health services, hence the NIL GST rate will apply. This advance decision applies to treatments performed at all registered hospitals, clinics, and physicians in India.

What medical products fall under the 5% GST rate?

5% GST rates on health care products and services:

5% is the lowest GST rate on medicines and medical supplies (other than zero GST) and applies to some major types of pharmaceutical products such as:

1. Diagnostic kit to detect all types of hepatitis
2. Oral rehydration salts
3. cyclosporin
4. Human / Animal Blood Vaccines
5. Medicines without the brand name used in the biochemistry system (inclusive of veterinary medicines)
6. Insulin
7. Deferiprone or Deferoxamine Injection
8. Diagnostic test kits with drugs and medicines as well as their esters and salts (specified in List 1 of the Central Product Notification 12 August)
9. Formulations made from bulk drugs specified in List 2 of the Central Product Notification 12/12
10. Medicines manufactured according to the formulations stated in the appropriate Pharmacopoeia / First Schedule of Ayurvedic, Siddha, Unani, Homeopathic, or Biochemistry Medicinal Medicine and Cosmetics Act, 1980.
11. Artificial kidney / Artificial kidney as well as the sterilized dialyzer
12. Artificial limbs, wheelchairs, crutches, walking frames, etc.
13. Coronary stent/stent system for use with cardiac catheters

* The list is indicative and includes many other pharmaceutical products in the 5% GST rate category.

Note: Holder of GST registration, whose annual turnover is more than 40 lakhs (excluding special category states) where the limit is Rs 20 lakhs, will be liable for filing GST return.

What medical products fall under the 12% GST rate?

Products under 12% GST on medical and pharmaceutical supplies are as follows:

The 12% GST rate is currently applicable to most drugs and other pharmaceutical preparations. Some of the major products with a 12% GST rate are:

  • Gland extracts (including gland extracts) and various organs (including organ extracts) powdered for dried or organo-therapeutic use
  • Diabetes foods, blood sugar monitoring system (glucometer) and test strips
  • Heparin and various heparin salts
  • Animal blood formulated for clinical, medical and prophylactic purposes
  • Any human/animal substance used for prophylactic or therapeutic purposes
  • Therapeutic/prophylactic uses for Ayurvedic, Unani, biochemistry, Siddha, or homeopathic medicines were prepared using two or more components packaged for retail sale as well as not packaged for retail sale.
  • Animal blood fractions including antisera, other blood fractions as well as related immunological products
  • Toothpowder 
  • Toxins, cultures of microbes (except yeast) and similar products for medical use
  • Pharmaceutical products such as sterile surgical catgut, sterile absorbent surgical/dental yarns, sterile tissue adhesives for surgical wound closure, sterile luminaria, sterile laminaria tents, waste pharmaceuticals, etc.
  • Bandages, weddings, gauges and similar items including dressings, poultry and adhesive plasters for use in surgical, veterinarian, dental or medical procedures (coated/coated with pharmaceutical substances)
  • Medical grade oxygen, hydrogen peroxide, etc.
  • Atrial septal defect occlusion device/patent ductus arteriosus
  • Medical use photographic film/plates for use in X-rays

* The list is indicative and many other pharmaceutical products are included in the category of drugs and medical products at 12% GST. 

Read about penalties of late GST return filing 

Which medical products come under the 18% GST rate?

18% GST on pharmaceutical preparations

The most applicable GST rate on a pharmaceutical products is 18% in India. And this section covers only a few medicinal things.

These are the High GST rated drugs-related products which are as follows:

  • Nicotine Polacrilex Gum
  • Preparation of dental/oral hygiene in individual retail packaging (except toothpowder) including dental powder and toothed paste, dental floss, etc.
  • Various hair care products (except Mehendi paste in cones)
  • Dental, surgical, medical, or veterinary furniture such as hospital beds, operating tables, examination tables, etc.

The list is indicative and many other pharmaceutical products are included in the category of drugs and medical products at 18% GST.

GST effect on medicines and medical supplies

1. Under the VAT regime, drugs, and other medical supplies were affected by cascading taxation as both excise and VAT applied to all medical supplies including medicines.

2. It has been abolished through the introduction of GST on medicines and other health care products.

3. In the case of various life-saving drugs, the price of medicines under GST has been almost the same.

4. Because the 4% VAT rate on MRP is 65% , which is being replaced via 5% GST rate, but there has no effect of key volume of MRP that is same level.

5. In the case of dietary supplement products, removal of excise duty has increased profitability and lower prices as these tax deduction benefits are passed on to customers.

6. The main effect of GST execution has had on supply sequence pharmaceutical products.

7. In order to avoid this tax burden, the Central State Tax (CST) payable under the first VAT regime for international transactions was 2%. The drug companies maintain their depots in every center and states where they worked.

8. After GST is implemented on drugs and other pharmaceutical products, the supply process is expected to be further streamlined as more companies employ hub and spoke models that reduce warehousing costs And optimize the benefit of input tax credit under GST.

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