GST on Medicine in India

Working out the GST on medicine

Most finished medicines are taxed at 5%, and the calculator below uses that rate. A notified list of life-saving drugs is Nil-rated and a few pharmacy lines sit at 18%, so check the category against the table further down. Multiply the taxable value by 5 percent to get the GST, then add it to the base price for the total.

• For an intra-state sale, the 5% splits into 2.5% CGST and 2.5% SGST.
• For an inter-state sale, a single 5% IGST applies instead.
• The calculator on this page is pre-set to the 5% rate and handles both cases.

A worked example

Suppose a medicine purchase has a taxable value of ₹1,000 before tax. Applying 5% GST works out as follows.

Medicine GST rates after the 2025 reform

The pharmaceutical sector saw one of the biggest changes under GST 2.0. The 12% medicine slab was abolished entirely on 22 September 2025, and its items moved down to 5% or to Nil. Most finished medicines now sit at 5% under HSN 3004. The table shows where each category landed.

Life-saving drugs at Nil rate

A list of 36 critical medicines is fully exempt from GST. This includes 33 drugs for cancer, rare diseases and severe chronic conditions that moved from 12% to Nil, and 3 rare-disease drugs (Agalsidase Beta, Imiglucerase and Eptacog alfa) that moved from 5% to Nil. Oral rehydration salts and all contraceptives are also Nil-rated. These are listed in Notification 9/2025-Central Tax (Rate), and any specific product should be checked against it.

The printed MRP already includes GST

A common mistake is adding GST on top of the printed MRP. The MRP on a medicine pack is inclusive of GST, so the tax is already built into the price you see. Pharmacies work backwards from the MRP to arrive at the taxable value. Drug makers were not required to recall or re-label stock manufactured before 22 September 2025, so older packs may still show a price calculated at the earlier rate.

Input tax credit and the API problem

Pharmacies, distributors and hospitals can claim input tax credit on medicines bought for resale at 5% or 18%. ITC is not available on Nil-rated life-saving drugs, since no GST is charged on them. A structural issue remains: many active pharmaceutical ingredients are still taxed at 18% while the finished medicine is 5%, which builds up unused credit for manufacturers. The government has introduced faster automated ITC refunds to ease this.

Medicines supplied by a hospital

This is a genuinely tricky area. Healthcare services provided by a clinical establishment are exempt from GST, and medicines and consumables supplied to an in-patient as part of treatment are generally treated as part of that composite exempt supply, so no GST applies. But the same medicine sold across the counter from the hospital's pharmacy to an out-patient or a walk-in customer is a normal taxable supply at 5%. The distinction turns on whether the medicine is part of a bundled treatment or a standalone sale.

Online pharmacies and registration

The rate is the same whether you buy from a neighbourhood chemist or an online pharmacy. A pharmacy selling through an e-commerce operator generally needs GST registration from the first sale regardless of turnover, rather than waiting for the ₹40 lakh goods threshold. The platform collects tax at source under Section 52 against the seller's GSTIN.

Medical devices and related items

Do not assume everything in a pharmacy shares the medicine rate. Most medical devices and diagnostic kits moved to 5% under GST 2.0, but items such as nicotine replacement gum, active pharmaceutical ingredients and nutritional supplements sit at 18%. Cosmetics and general wellness products carry their own rates entirely. Each line on a pharmacy invoice should show its own HSN and rate.

Frequently asked questions