After the introduction of GST in pharmaceutical products and medical supplies in India, they are taxed with four separate rates of zero, 5%, 12%, and 18%. The null GST in medications is currently only applicable to human blood and its derivatives, as well as to all types of contraceptives. The highest rate of GST in medications, that is, 18% is applicable only to products that contain nicotine polacrilex, such as nicotine gum. The lower GST rate of 5% (apart from the zero GST rate) applies to pharmaceutical products designated as “life-saving medicines”, including vaccines, oral rehydration salts, as well as medications such as those are used to treat tuberculosis, diabetes, and HIV. – AIDS, malaria, etc. So far, there are no pharmaceutical products at the highest rate of 28% of GST.
Zero GST in medications is currently applicable to the following products:
5% is the lowest GST rate in medications and medical supplies (other than null GST) and applicable to some key types of pharmaceutical products such as *:
The 12% GST rate currently applies to most medications and other pharmaceutical preparations. Some of the key products with the GST rate of 12% are the following *:
* The list is indicative and many other pharmaceutical products are included in the 12% GST in the category of medicines and medical products.
The GST rate of 18% is the highest applicable to pharmaceuticals in India and only a few medications are included in this section. The following are medications/products related to pharmaceutical products that attract this high rate of GST:
Note: The list is indicative and many other pharmaceutical products are included in the 18% GST in the category of medicines and medical products.
Health care services for humans and animals (veterinary medical services) are included in the GST Act. Under existing regulations, there is no GST in health care services provided by an authorized medical professional, an authorized medical or paramedical clinic. The same null GST rate also applies to all medical services provided while transporting a patient by ambulance. In the case of veterinary health care services provided to birds/animals in authorized clinics, the applicable GST rate is also nil.
Initially, there was confusion regarding the charges of GST on medications and other medical consumables used during hospitalization (treatment of hospitalized patients). In response to a query on this issue, the Advanced Regulatory Authority (AAR) in Kerala has ruled that the supply of medications, implants and other consumables used (e.g., diagnostic supplies and surgical equipment) during hospitalization will have zero GST. According to the AAR, these will be included as part of the composite supplies included as part of the health care services, therefore, the zero GST rate will apply. This advance ruling is applicable to treatments performed in all hospitals, clinics, and doctors registered throughout India.
Under the VAT regime, medicines and other medical supplies were affected by cascading taxes, since both VAT tax and excise duties were appropriate to all medical supplies, including medicines. This has been eliminated by introducing GST in medications and other health productions. In the case of several life-saving medicines, the price of drugs under GST has remained almost the same. This is because a 4% VAT rate over 65% MRP (that is, 4% VAT was above the excise tax) is replaced by a 5% GST rate, which makes the Prices remain at the same level in terms of MRP. In the case of dietary supplement products, the elimination of the special tax has led to greater profitability and lower prices as these tax reduction benefits are transmitted to customers.
The main impact of the GST implementation has been in the pharmaceutical supply chain. Under the previous VAT regime, the central state tax (CST) payable for interstate transactions was 2%. To avoid this tax burden, pharmaceutical companies maintained deposits in each state/union territory where they operated. After the introduction of GST in medicines and other pharmaceutical products, the supply process is expected to be streamlined as more companies use a center and radio model that reduces storage costs and optimizes the benefit of the Low Entry Tax Credit GST
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