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4 Tax Slabs with 18% highest on all Medicines and Medical Products in India

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By Arpit Kulshrestha
Medicines and other medical supplies are taxed at four different tax slabs Nill, 5%, 12% and 18%. No tax is levied on the supplies of blood and its-by products and all the contraceptives, while GST on all the life-saving medicines is 5% (vaccines for AIDS, TB, diabetes, malaria, etc.). The highest 18% GST is charged on medicines that have nicotine polacrilex in their composition. The highest tax slab is 28% but none of the medicines or medical supplies are charged at 25% GST. 

Medicines and medical supplies listed under their respective GST rates:

Medicines and Medical Supplies taxed at NIL GST :
  • Human Blood and any medicine that has the composition of by-products of blood.   
  • Any kind of contraceptive medicine.
Medicines and Medical Supplies taxed at 5% GST :
  • Oral Rehydration Salts
  • Diagnostic kits for hepatitis
  • Human/animal blood vaccines
  • Artificial limbs, crutches, walking frames, wheelchairs, etc. 
  • Insulin injections and tablets. 
  • Cyclosporin
  • Formulations manufactured from bulk drugs specified in List 2 of central excise notification 12/2012
  • Medicaments (especially veterinary medicines) for used in biochemical medical systems.
  • Artificial kidneys and disposable micro barriers dialyzers of artificial kidneys. 
  • Ayurvedic, Siddha, Unani, Homeopathic or Bio-chemic medicines manufactured in accordance with formulations prescribed in appropriate pharmacopoeia/ First Schedule of the Drugs and Cosmetics Act, 1940.
  • Medicinal drugs, their esters & salt and Diagnostic kits (duly mentioned under list 1 of Central Excise notification no. 12/2012).
  • Deferiprone or Deferoxamine injection
  • Coronary stents/stent systems for use with cardiac catheters
Except for the aforementioned list, several other medicines and medical products are taxed at a 5% GST rate slab.
  • Medicines and Medical Supplies taxed at 12% GST :
  • Any human/animal substance that is used exclusively for prophylactic or therapeutic purposes
  • Animal blood prepared for diagnostic, therapeutic and prophylactic purposes. 
  • Fractions of animal blood including antisera, other blood fractions as well as related immunological products
  •  Heparin and various heparin salts
  • Glands and gland extracts, organs and organ extracts for organo-therapeutic uses (dried or powdered form).
  • Toothpowder
  • Ayurvedic, Unani, Bio-chemic, siddha or homeopathic medications for therapeutic/prophylactic use prepared using two or more constituents packed for retail sales as well as not packed for retail sales.
  • Toxins, cultures of microorganisms (excluding yeasts)and similar products for medical use. 
  • Wadding, bandages and other such medical aid including dressings, plasters exclusively used for surgical, veterinarian, dental or medical procedures (coated/impregnated with pharmaceutical substances)
  •  Diabetic foods, glucometer (for monitoring blood glucose) and test strips. 
  • Sterile surgical catgut, sterile absorbable surgical/dental yarns, sterile tissue used exclusively for surgical wound closure, sterile luminaria, sterile laminaria tents, waste pharmaceuticals, etc.
  • Atrial septal defect occlusion device/Patent Ductus Arteriosus
  • Photographic film/plates for use in medical use X-rays
  • Medical grade oxygen, hydrogen peroxide, etc.
Except for the aforementioned list, several other medicines and medical products are taxed at a 12% GST rate slab.

Medicines and Medical Supplies taxed at 18% GST :

  • Hair care items (except mehndi paste cones)
  • Dental, surgical, medical or veterinary furniture such as hospital beds, operating tables, examination tables etc.
  • Dental/oral hygiene kits like dental powders/pastes, dental floss, etc. (excluding toothpowder). 
  • Nicotine polacrilex gum
Except for the aforementioned list, several other medicines and medical products are taxed at a 18% GST rate slab.

No GST Charged on Medical Service

As per the GST Act 2017, the medical and health facilities for humans and animals such as the services rendered by the medical practitioner (doctors) licensed medical or paramedical clinic will attract NIL GST Rates along with ambulance services or other patient transportation services. 

No GST will be charged on treatment and other medical services for veterinary.  

No GST Charged on getting patients hospitalized

Authority of Advance Ruling (AAR), Kerala declared all the medicines and other medical aid used at the time of hospitalizing any individual tax-free. NIL GST will be charged on such facilities. 

The medicines, medical aid and services provided at the time of hospitalizing an individual will attract no GST as these are included under healthcare services given during admitting a patient. The said rule applies to all the hospitals and clinics located across the nation.

GST Impact - On Medicines and Medical Products 

The most prominent effect of GST on medicines and medical supplies is that, unlike the Value Added Tax (VAT) System, there is no cascading of tax on various levels of production of medicines and other related products. For several medicines and medical products, GST is imposed in a way that there is minimal to no change in the end value of the medicine. 

Dietary products are exempt from excise duty and taxes are reduced benefitting the consumers.

For pharma companies, storing medicines or medical equipment or other related medical products in the warehouse (for inter-state supplies) attracted 2% VAT but with the implementation of GST, the warehousing cost has reduced as Input Tax Credit can be availed by the taxpayers and also the GST rates of medicines and other related products are same in all the states of India.
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