GST on Medicines
After the implementation of GST on pharmaceuticals and medical supplies in India, there are 4 tax rates decided to be applied on the same i.e. Nil,5%, 12 and 18%. Nil applies currently to human blood and its derivatives as well as all types of contraceptives. The highest GST rate applicable to medicines is 18%. It applies to products containing Nicotine Polacrilex such as nicotine gum.
The lowest GST rate of 5% applies to pharmaceutical products designated as “life-saving drugs” including oral rehydration salts, vaccines as well as medicines which are used in the treatment of diabetes, HIV-AIDS, Malaria, etc. There are no pharmaceutical products featured in the highest 28% GST rate.
Nil GST Rate Pharmaceutical Products
The zero GST on medicines is currently applicable only to the following products:
- Human blood and its components used in medicine
- All types of contraceptive products
5% GST on medicines and other medical supplies
The lowest GST rate applicable to medicines and medical supplies is 5%. List of medicines that are part of this GST rate is mentioned below:
- Human/animal blood vaccines
- Diagnostic kits for detecting all types of hepatitis
- Cyclosporin
- Oral rehydration salts
- Insulin
- Medicaments (inclusive of veterinary medicines) without brand name used in bio-chemic medical system
- Deferiprone or deferoxamine injection
- Medicines or drugs as well as their esters and salts as well as diagnostic test kits (specified in List 1 of central excise notification 12/2012)
- Formulations manufactured from bulk drugs specified in List 2 of central excise notification 12/2012
- Ayurvedic, Siddha, Unani, Homeopathic or Bio-chemic medicaments manufactured following the formulations prescribed in an appropriate pharmacopoeia/ First Schedule of the Drugs and Cosmetics Act, 1940.
- Artificial kidneys as well as disposable micro barriers/sterilized dialyzers of artificial kidneys
- Artificial limbs, wheelchairs, crutches, walking frames, etc.
- Coronary stents/stent systems for use with cardiac catheters.
12% GST on medical and pharmaceutical supplies
- Glands (including gland extracts) and various organs (including organ extracts) dried or powdered for organo-therapeutic uses.
- Heparin and various heparin salts
- Any human/animal substances used for prophylactic or therapeutic purposes
- Animal blood prepared for diagnostic, therapeutic and prophylactic purposes
- Animal blood fractions including antisera, other blood fractions as well as related immunological products
- Toxins, cultures of micro-organisms (excluding yeasts) and similar products for medical use
- Toothpowder
- Ayurvedic, Unani, Bio-chemic, Siddha or homeopathic medicaments for therapeutic/prophylactic use prepared using two or more constituents packed for retail sales as well as not packed for retail sales.
- Bandage, wadding, gauge and similar types of items including dressings, poultices and adhesive plasters for use in surgical, veterinarian, dental or medical procedures (coated/impregnated with pharmaceutical substances)
- Pharmaceutical products such as sterile surgical catgut, sterile absorbable surgical/dental yarns, sterile tissue adhesives for surgical wound closure, sterile luminaria, sterile laminaria tents, waste pharmaceuticals, etc.
- Diabetic foods, blood glucose monitoring system (glucometer) and test strips
- Atrial septal defect occlusion device/Patent Ductus Arteriosus
- Medical grade oxygen, hydrogen peroxide, etc.
- Photographic film/plates for use in medical use X-rays
18% GST on Pharmaceutical preparations
- The highest GST rate applies to pharmaceutical products is 18%. Only a few medicinal items are included in this section.
- Nicotine Polacrilex Gum
- Preparations for dental/oral hygiene including denture powders and fixative pastes, dental floss, etc. in individual retail packaging (excluding toothpowder)
- Various hair care products (excluding mehndi pate in cones)
- Dental, surgical, medical or veterinary furniture such as hospital beds, operating tables, examination tables, etc.
Nil GST on Medical Services
In the GST act, Health care services for both the human and animals are included in this. As per the existing rules, there is a nil GST on health care services are given to an authorized medical practitioner, licensed medical or paramedical clinic. The same GST rate also applies to any or medical services provided during the transportation of a patient by ambulance. In case of veterinary health care services provided to birds/animals at authorized clinics, the applicable GST rate is also nil.
Nil GST on Medicines used during Hospitalization
Initially, there is a confusion regarding the GST charges applicable to
medicines and medical consumables used during hospitalization. To clear all the
doubts related to this, the authority of Advance ruling (AAR) in Kerala has
ruled the supply of medications, implants and other consumables used. (e.g.
diagnostic supplies and surgical equipment) during hospitalization will feature
nil GST.
As per the AAR, these are to be included as part of composite supplies
included as part of healthcare services hence the nil GST rate will be
applicable. This advance ruling applies to treatments carried out at all
registered hospitals, clinics and physicians across India.
GST impact on medicines and the medical supplies
As per the VAT regime, the impact on medications and other medical supplies was impacted by the cascading taxation as both excise duty and VAT applied to all medical supplies including medicines. After the GST, the cascading effect reduces to some extent on medicines and other healthcare productions. In the case of various lifesaving medications, the cost of the medicines under GST has remained nearly the same.
VAT rate of 4% on 65% of MRP being replaced by GST rate of 5%, as a result leading prices to be maintained at the same level om terms of MRP.
In the case of diet-related supplementary products, removal of excise duty led to bring an increase in the profitability and lower prices as these tax reduction benefits get passed on to the customers.
The main impact of GST implementation is reflected in the supply chain of pharmaceutical products. Earlier, in the VAT regime, Central State Tax payable for interstate transactions was 2%. To reduce the tax burden, pharmaceutical companies created depots in every state and union territory in which they were operational.
After the GST implementation of medicines and other pharmaceutical products, the supply process becomes more streamlined. Most of the companies employ a hub and spoke model to reduce the cost of warehousing. It also results in optimizing the benefit of Input Tax Credit under the GST.
