GST on Medicines in India — 5%, Nil or Exempt?

Yes. Before 22 September 2025 most medicines were taxed at 12%. Under GST 2.0 the 12% slab was removed and almost all finished medicines moved down to 5%, while 36 critical life-saving drugs were reduced to Nil. Medical devices also dropped from 12%/18% to a uniform 5%, and nutraceuticals were cut from 18% to 5%. The reform was aimed at making healthcare more affordable.

Under GST 2.0, 36 medicines are Nil-rated: 33 life-saving drugs were reduced from 12% to Nil, and 3 drugs used for cancer, rare diseases and other severe chronic conditions were reduced from 5% to Nil. Human blood and its components, and contraceptives, also remain exempt. The government publishes the specific notified list; confirm a drug against it before invoicing at Nil.

No. The 12% slab that earlier applied to most medicines was abolished under GST 2.0 effective 22 September 2025. Finished medicines are now either Nil (notified life-saving drugs) or 5% (everything else). Only bulk Active Pharmaceutical Ingredients (APIs) sit at the higher 18% rate as an industrial input.

Ayurvedic, Unani, Siddha and Homeopathy medicines are now taxed at 5% GST, the same as allopathic medicines, after the GST 2.0 rate cut removed the earlier 12% rate. They are classified under HSN 3003/3004 in retail packing.

When a patient is admitted and treated, the whole healthcare service — including medicines, implants and consumables used during treatment — is a single composite supply of healthcare, which is exempt from GST. So an admitted patient getting IV drips, injections and tablets during treatment is not charged GST on them. However, a hospital pharmacy selling to outpatients or over the counter charges the normal 5% GST, as that is a standalone taxable retail supply.

Yes. Healthcare services provided by a clinical establishment, authorised medical practitioner or paramedic — hospitals, clinics and nursing homes — are exempt under Notification 12/2017-CT(R). This covers in-patient treatment, surgery packages, ambulance services, blood-bank services and diagnostic tests such as MRI and X-ray done as part of treatment.

No. Because healthcare is an exempt supply, hospitals cannot claim Input Tax Credit on the GST they pay on medical equipment, medicines and consumables used for exempt treatment — that GST becomes an embedded cost. Only the portion attributable to taxable supplies, such as an OPD pharmacy selling to outpatients, supports proportionate ITC.

GST 2.0 brought almost all medical devices down to a uniform 5% (from 12% or 18%). This includes glucometers, thermometers, BP monitors, diagnostic and test kits, MRI/CT/X-ray/ultrasound machines, surgical instruments, gauze, bandages, gloves, wheelchairs, crutches, hearing aids and artificial limbs. Human blood and its components remain Nil-rated.

Nutraceuticals, multivitamins, protein powders and health supplements were cut from 18% to 5% GST under GST 2.0 effective 22 September 2025. The government reduced the rate to make these products more affordable and asked companies to pass on the saving. They are classified under HSN 2106.

Sanitary napkins are Nil-rated (exempt) from GST — they have been GST-free since July 2018. Contraceptives, human blood and its components, and baby feeding bottles are also exempt under the current schedule.

Yes. A registered standalone pharmacy, distributor or wholesaler selling taxable medicines (5%) can claim ITC on medicine purchases from registered suppliers, packaging, billing software and shop rent — provided the supplier issued a valid tax invoice and it appears in GSTR-2B. Only a hospital pharmacy attached to an exempt hospital has blocked ITC. Manufacturers get full ITC on APIs, machinery and packaging.

An inverted duty structure arises when the GST on your inputs is higher than the GST on your output — common in pharma where old stock or APIs are taxed at 12%/18% but finished medicines are sold at 5%. The accumulated unused ITC is refundable under the inverted-duty-structure refund provision. Rather than letting the credit pile up, file the refund claim with the supporting reconciliation.

Exports of medicines are zero-rated. An exporter can either export under a Letter of Undertaking (LUT) without paying IGST and claim a refund of accumulated ITC, or pay IGST and claim it back. Either way the exporter recovers the input GST, so the export is effectively tax-free.

A pharmacy, distributor or manufacturer supplies goods, so registration is mandatory once aggregate turnover crosses ₹40 lakh in a financial year (₹20 lakh in special-category states). Businesses making inter-state supplies, or supplying through an e-commerce operator, generally need to register regardless of turnover.

Finished medicines and formulations fall under HSN Chapter 30 — mainly 3003 (bulk/mixed medicaments) and 3004 (medicaments in measured/retail packing). Vaccines and blood products are under 3002. The specific 8-digit HSN determines whether the item is Nil or 5%, so map each product carefully; you can look it up with an HSN finder.