Under the GST 2.0 reform effective 22 September 2025, most medicines and pharmaceutical products are now taxed at 5% (cut from 12%). A notified list of 36 life-saving, cancer and rare-disease drugs is Nil (fully exempt). Most medical devices are also 5% (cut from 12%/18%), and contraceptives remain Nil.
GST Rate on Medicines & Devices — Decision Table
Current GST rates by pharmaceutical category after the 22 September 2025 rationalisation, with typical HSN codes.
| Product / Category | GST Rate | HSN | Notes |
|---|---|---|---|
| General medicines & formulations | 5% | 3003 / 3004 | Most OTC & prescription drugs (was 12%) |
| Notified life-saving drugs (36 drugs) | Nil | 3004 | Cancer, rare-disease & severe chronic — exempt |
| Insulin & human vaccines | 5% | 3002 / 3004 | Concessional medicament rate |
| Branded Ayurvedic / Unani / Homeopathic | 5% | 3003 / 3004 | Branded = registered trademark |
| Unbranded Ayurvedic formulations | Nil | 3003 | No brand name / trademark — exempt |
| Medical devices & apparatus | 5% | 9018–9022 | Cut from 12%/18% on 22 Sep 2025 |
| Diagnostic / test kits | 5% | 3822 | Glucose, pregnancy & clinical kits |
| Coronary stents & implants | 5% | 9021 | Medical device category |
| Contraceptives / condoms | Nil | 4014 / 3006 | Notified contraceptives — exempt |
| Hand sanitiser / hand rub | 18% | 3808 / 3402 | Not a medicament — standard slab |
Rates reflect the GST 2.0 two-slab structure effective 22 September 2025. Confirm the exact HSN on the official GST portal before invoicing — 8-digit codes vary by drug.
Life-Saving Drugs Now at Nil GST
From 22 September 2025 the GST Council fully exempted 36 critical drugs — 33 moved from 12% to Nil and 3 cancer/rare-disease drugs from 5% to Nil. The aim is patient affordability for cancer, rare diseases and severe chronic conditions.
A Nil-rated (exempt) medicine blocks the seller's Input Tax Credit on inputs for that product, unlike a 5% taxable supply where ITC flows. Pharmacies stocking a mix of Nil and 5% items must apportion input credit carefully to stay compliant.
Selling a mix of exempt and 5% medicines? Get your ITC apportionment checked.
Talk to a GST Expert →
Old GST vs New GST on Medicines
The GST 2.0 rationalisation abolished the 12% slab for most pharma and cut rates sharply. Here is the before-and-after for the common categories.
| Category | Old Rate (till 21 Sep 2025) | New Rate (from 22 Sep 2025) |
|---|---|---|
| General medicines | 12% | 5% |
| Life-saving / cancer / rare-disease drugs | 5% / 12% | Nil |
| Medical devices & apparatus | 12% / 18% | 5% |
| Diagnostic kits | 12% | 5% |
| Branded AYUSH medicines | 12% | 5% |
Sale price of a ₹100 medicine strip drops from ₹112 to ₹105; a ₹100 exempt life-saving drug drops to ₹100.
Old 12% medicine
New 5% medicine
Need to re-price stock and update your POS for the new 5% rate?
Get GST Advice →ITC Chain — Manufacturer to Pharmacy
A GST-registered pharmacy, distributor or manufacturer on the regular scheme can claim full Input Tax Credit on medicine purchases, provided the supplier filed GSTR-1 and the invoice appears in GSTR-2B.
- 1ManufacturerPays 5% on inputs, claims ITC
- 2Distributor / C&FBuys & sells at 5%, claims ITC
- 3Retail pharmacyCharges 5%, nets ITC on stock
- 4PatientPays 5% (or Nil on exempt drugs)
✓Regular scheme suits you if
- You want full ITC on purchases & overheads
- Turnover is high with thin margins
- You supply to B2B / other registered dealers
!Composition (1%) may suit if
- Turnover is up to ₹1.5cr & mostly retail
- You want simpler quarterly compliance
- You can absorb loss of ITC on purchases
A pharmacy under the composition scheme pays a flat 1% of turnover but cannot claim ITC and cannot charge GST on the bill — files quarterly CMP-08 and annual GSTR-4.
Not sure whether regular or composition is cheaper for your pharmacy?
Talk to a GST Expert →GST on Medicines in Hospitals
Healthcare services by a clinical establishment are exempt. Medicines supplied as part of an in-patient treatment package are a composite healthcare supply and are exempt; a standalone hospital pharmacy selling to out-patients charges normal GST (5% or Nil).
| Situation | GST on Medicine | Reason |
|---|---|---|
| In-patient treatment package | Exempt | Composite healthcare supply |
| Out-patient pharmacy sale | 5% | Standalone taxable supply |
| Life-saving drug (any setting) | Nil | Notified exempt drug |
Exempt supplies block ITC on related inputs under Section 17(2) of the CGST Act.
Pharma GST Compliance Checklist
Registration is mandatory once aggregate turnover crosses ₹40 lakh for a goods supplier (₹20 lakh in special-category states). Here is the compliance picture for a pharmacy, distributor or manufacturer:
- GST registration (GSTIN)
- Correct HSN & rate mapping
- Tax invoice / bill of supply
- ITC reconciliation (GSTR-2B)
- Nil vs 5% apportionment
- GSTR-1 (outward supplies)
- GSTR-3B (monthly/quarterly)
- E-invoicing applicability
- E-way bill on stock movement
- GSTR-9 annual return
- Drug licence & records
- Composition CMP-08 / GSTR-4 (if opted)
After the 22 September 2025 cut, the biggest compliance trap is mixing Nil-rated life-saving drugs with 5% stock — you must reverse ITC attributable to exempt sales. Map every SKU to the correct HSN and rate in your billing software before you invoice.
- Rates & notifications: gst.gov.in
- CBIC rate finder: cbic-gst.gov.in
- 56th GST Council recommendations (eff. 22 Sep 2025) — pharma & medical devices
- HSN Chapter 30 (pharmaceuticals) & Chapter 90 (medical devices)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.