Knowing GST on Medicines and Medical Supplies is crucial, especially when a coronavirus crisis is happening. The GST Council has decided on the GST rates for pharmaceuticals in India on 3 June 2017. As we all know, the GST is collected at five different rates according to the Council resolution, namely NIL, 5%, 12%, 18% and 28% on the basis of the item’s HSN code. Furthermore, The 37th chapter of the HSN Code classifies medicinal products and medicines. Therefore, In this article, we will read about GST on Medicines and Medical Supplies in India.
Understand about GST
As the name suggests, The Goods and Services Tax (GST) is a tax imposed on the supply of goods and services. The GST tax imposed is a blend of the CGST and the SGST, which are the central GST and the State GST.
The primary goal of this tax structure is to manage the cascading effects of other indirect taxes. For instance, The GST on Transport eliminates other indirect taxes, including service tax, excise duty, VAT, etc.
Applicability of GST on Medicine
In India, GST applies to both selling of medicines and services given by medical professionals. Let us now understand, GST on Medicine and its applicability on Medical Services.
GST on Medical Services
Medical Services by Paramedical Clinic, Medical Practitioner having License covering both Humans and Veterinary attract nil GST Rate.
GST on Hospitalization
GST on Medicines and Medical Supplies while hospitalization of patients attract Nil GST Rate.
GST on Selling Medicines
GST on Selling Medicines has different taxation rates. These GST Rates are typically of four types that are – Nil, 5%, 12%, and 18%. These rates depend on the kind of medicines. Some of the GST Rates on Selling of Medicines are given later in the article.
GST on Medicine which crosses Expiry Date
If the medicine reaches the expiry date, the same shall be returned to the manufacturer with the help of the supply chain. As a consequence, Retailers and Wholesalers can choose to either treat the returned goods as fresh supply or Issue of a credit note for returned goods.
What is GST on Medicine while Importing?
Import of Medicines attracts two types of taxes. These are IGST( Integrated Goods and Service Tax) plus Customs Duty.
- Customs Duty on Import of Medicines – Ten Percent on assessable Value
- IGST – Total of 18 percent after adding Custom Duty of Assessable Value and basic customs duty Social welfare surcharge – 10%
Thus, importing medicines in India is a costly affair as the taxation gets doubled due to GST plus Customs duty charges.
Know about GST on Medicines
It is important to note that blood and by-products and all contraceptives are attracting the NIL rate.
Similarly, The lowest GST rate of 5% applies to vaccines and life-saving pharmaceuticals for TB, AIDS, diabetes, malaria, etc.
Besides, Only medications like nicotine gum that include nicotine polacrilex attract the maximum GST rate of 18 percent. Lastly, no medications or medical supplies have a GST tax rate of 28 percent.
However, GST is levied at 28% for some other items and services in the pharmaceutical industry.
Medicines and Medical Supplies
GST on Medicines and Medical Supplies
|Animal/Human Blood Vaccines||300290, 300220||5%|
|Oral rehydration salts||30049086||5%|
|Drugs including salts and esters and diagnostic test kits, specified in List 1 of this Schedule.||30022014||5%|
|Medicines manufactured as per the formulae described in the authoritative books||30044090||5%|
|Nicotine polacrilex gum||29397910||18%|
|Menthol and menthol crystals||30039021||12%|
|All human/animal substances used for therapeutic purposes||30011099||12%|
|Glands and various organs (dried or powdered) for organo-therapeutic uses||30019010||12%|
|Bandage, wadding, gauge, and similar types of items||30059010||12%|
|Pharmaceutical products such as sterile surgical catgut, sterile absorbable surgical/dental yarns, sterile tissue adhesives for surgical wound closure, etc.||300610||12%|
|Ayurvedic, Unani, Bio-chemic, Siddha or homeopathy medicines for therapeutic use||30039014||12%|
Important Note: The only medicines or pharmaceutical products charged at a GST rate of 18 percent is nicotine polacrilex gum. No 28% GST was imposed on pharmaceutical products or medications. The maximum rate of GST for medicinal products is thus 18%.
However, there have been Revised GST Rates on Covid-19 Medicines. Likewise, the GST Tax rate is reduced in Testing Kits and Machines.
Revised GST Rates on Testing Kits and Machines
|Item Name||Current GST Rate||Reduced GST Rate|
|Covid Testing Kits||12%||5%|
|Specified Inflammatory Diagnostic Kits, namely D-Dimer, IL-6, Ferritin, and LDH||12%||5%|
Conclusion – GST on Medicines
In conclusion, With GST being introduced instead of value-added tax (VAT), taxes on the various stages of manufacturing and sale of medicinal products and medical supplies of all types have been reduced. Medicinal products are subject to GST to such an extent that costs in most situations stay constant.
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