Key Takeaways
- Most medicines (HSN 3003/3004) attract 5% GST after the 56th GST Council rate revision effective September 22, 2025, down from the earlier 12%.
- 33 life-saving drugs for cancer, HIV, TB, and rare diseases are fully exempt (0% GST) per the same Council recommendation.
- Medical devices, surgical instruments, and diagnostic kits now attract 5% GST, reduced from 12-18%.
- Human blood and its components, contraceptives, and hearing aids remain at 0% (exempt).
- Active Pharmaceutical Ingredients (APIs) and chemical intermediates continue at 18% GST.
- E-invoicing is mandatory for pharma businesses with turnover exceeding Rs 5 crore. E-way bill is required for consignments above Rs 50,000.
What is the GST rate on medicines in India in 2026? Most pharmaceutical formulations (HSN 3003/3004) attract 5% GST from September 22, 2025, reduced from 12% by the 56th GST Council. Life-saving drugs for cancer, HIV, TB, and rare diseases are fully exempt at 0%. Active Pharmaceutical Ingredients (APIs) and chemical intermediates remain at 18% GST (56th GST Council Meeting, September 3-4, 2025; Notification effective September 22, 2025).
Medicines are taxable goods under the Goods and Services Tax (GST) framework. This is distinct from healthcare services (consultations, diagnostics, surgeries) provided by hospitals and doctors, which are exempt under Entry 74 of Notification No. 12/2017. For pharmacists, pharmaceutical distributors, hospital purchase managers, and their accountants, understanding the correct GST rate by product category is essential for accurate invoicing, Input Tax Credit (ITC) claims, and return filing.
This guide covers every GST rate applicable to medicines, pharmaceutical products, and medical devices in India after the September 2025 reforms.
Looking for expert help with GST rates on medicines pharmaceuticals medical devices India 2026? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
GST Rate Structure for Medicines After September 2025
The 56th GST Council meeting (September 3-4, 2025) simplified the rate structure for pharmaceutical products. The earlier 12% slab for most formulations was reduced to 5%, and 33 life-saving drugs were moved to 0%.
Tax Rate Chart
GST Rates on Medicines and Pharma Products (2026)
Effective September 22, 2025 (56th GST Council)
Life-saving drugs (cancer, HIV, TB, rare diseases), human blood, contraceptives, hearing aids
33+ drugs fully exempt
All formulations (tablets, capsules, syrups, injectables), OTC medicines, Ayurvedic/Unani/Siddha/Homeopathic medicines, medical devices, surgical instruments, diagnostic kits
Reduced from 12%
Active Pharmaceutical Ingredients (APIs), Key Starting Materials (KSMs), bulk drugs, chemical intermediates, laboratory chemicals
Raw material stage
Source: 56th GST Council Meeting (September 3-4, 2025)
HSN Codes for Pharmaceutical Products
Every pharmaceutical product must be classified under the correct Harmonized System of Nomenclature (HSN) code for invoicing and return filing.
| HSN Code | Category | GST Rate | Examples |
|---|---|---|---|
| 2937 | Hormones, prostaglandins | 5% | Insulin, adrenaline, cortisone |
| 3001 | Dried glands, extracts | 5% | Heparin, pepsin, gland powders |
| 3002 | Vaccines, human blood, antisera | 0-5% | Blood (0%), vaccines (0% under national programs, 5% otherwise) |
| 3003 | Medicaments not in measured doses | 5% | Bulk drug mixtures for therapeutic use |
| 3004 | Medicaments in measured doses (retail) | 5% | Tablets, capsules, syrups, ointments, injectables |
| 3005 | Dressings, bandages, surgical tapes | 5% | Adhesive dressings, medicated bandages |
| 3006 | Pharmaceutical goods | 5% | Sterile surgical catgut, blood grouping reagents, dental cements |
| 9018-9022 | Medical instruments and devices | 5% | Stethoscopes, BP monitors, X-ray machines, diagnostic equipment |
HSN 3003 and 3004 cover the widest range of finished medicines. The distinction is packaging: 3003 applies to bulk (not in retail form), while 3004 applies to retail-packed formulations.
Life-Saving Drugs at 0% GST
The 56th GST Council moved 33 life-saving drugs from 12% to 0% and three drugs from 5% to 0%. These cover cancer treatment, HIV/AIDS, tuberculosis, and rare diseases. Key categories include:
- Anti-cancer drugs: Rituximab, Pembrolizumab, Trastuzumab, and other targeted therapies
- HIV/AIDS treatment: Antiretroviral (ARV) medications
- Tuberculosis drugs: Bedaquiline, Delamanid
- Rare disease treatments: Drugs for chronic kidney ailments and other specified rare diseases
Other permanently exempt items: human blood and its components (HSN 3002), all contraceptives, hearing aids, and braille equipment.
Medical Device GST Rates
Medical devices saw significant rate reductions under the same Council recommendation:
Comparison
Medical Device GST Rates: Before vs After September 2025
| Parameter | Before Sept 2025 | After Sept 2025 |
|---|---|---|
| Cardiac stents | 12% | 5% |
| Orthopaedic implants | 12% | 5% |
| Knee replacement implants | 18% | 5% |
| Glucometers, BP monitors | 12% | 5% |
| Diagnostic kits, reagents | 12-18% | 5% |
| Surgical instruments | 12% | 5% |
| Hearing aids | 0% | 0% |
| Contact lenses | 12% | 5% |
Source: 56th GST Council Meeting; PIB Press Release
Ayurvedic, Unani, Siddha, and Homeopathic Medicines
Manufactured medicines under the Indian Systems of Medicine now attract a uniform 5% GST (reduced from 12%). This applies to formulations under HSN 3003 and 3004, regardless of whether they are allopathic, Ayurvedic, Unani, Siddha, or Homeopathic.
The distinction matters for unmanufactured/raw herbs and plant products: unprocessed Ayurvedic herbs sold as raw agricultural produce may be exempt (0%), while manufactured formulations (packaged, labelled, with dosage instructions) attract 5%.
ITC Eligibility for Pharma Businesses
Input Tax Credit rules for pharmaceutical companies follow the standard GST ITC framework, with specific implications:
-
Manufacturers: Can claim ITC on APIs (18%) and packaging materials used in manufacturing medicines (5%). The inverted duty structure (higher input tax, lower output tax) makes pharma manufacturers eligible for ITC refunds under Rule 89(5) of CGST Rules.
-
Distributors and wholesalers: Can claim ITC on purchases from manufacturers (5%) and set off against output liability on sales (5%). Full ITC available.
-
Retail pharmacies: Can claim ITC on medicine purchases. However, if operating under the Composition Scheme, ITC is not available.
-
Hospitals: Can claim ITC on medicines and devices only when used for taxable supplies. Medicines used in exempt healthcare services (Entry 74) do not qualify for ITC under Section 17(5) read with Section 17(2).
E-Invoice and E-Way Bill for Pharma Businesses
Step-by-Step Guide
Pharma GST Compliance Checklist
Mandatory requirements for pharmaceutical businesses
HSN Classification
Classify every product under the correct HSN code (3003/3004 for formulations, 2937 for hormones). Wrong classification leads to incorrect tax rates and ITC issues.
FoundationE-Invoicing
Mandatory for businesses with aggregate turnover exceeding Rs 5 crore (in any FY from 2017-18 onwards). Generate IRN on the Invoice Registration Portal before issuing invoices. See our detailed e-invoicing guide.
Rs 5 Cr+E-Way Bill
Generate Part-A and Part-B of the e-way bill for every consignment exceeding Rs 50,000 in value. Required for both inter-state and intra-state movement of medicines.
Rs 50,000+Monthly Returns
File GSTR-1 (outward supplies) by the 11th and GSTR-3B (summary return) by the 20th of the following month. Pharma distributors with high transaction volumes should reconcile ITC via GSTR-2B.
MonthlySource: CGST Rules; Notification effective August 1, 2023 (e-invoice threshold)
Composition Scheme for Pharmacies
Retail pharmacies with aggregate turnover up to Rs 1.5 crore (Rs 75 lakh in special category states) can opt for the Composition Scheme under Section 10 of the CGST Act. Key trade-offs:
- GST rate: 1% (0.5% CGST + 0.5% SGST) on turnover instead of 5% on each invoice
- No ITC: Cannot claim Input Tax Credit on purchases
- No inter-state sales: Cannot make inter-state supplies
- Quarterly filing: File CMP-08 quarterly instead of monthly GSTR-1/3B
- No e-invoicing: Not applicable to composition dealers
For a pharmacy with gross margins of 15-20%, the 1% composition rate is often lower than the effective tax after ITC under the regular scheme. Run the numbers for your specific case.
Common Mistakes to Avoid
-
Applying the old 12% rate: All formulations moved to 5% from September 22, 2025. Invoices issued at 12% after this date will require credit notes and revised returns.
-
Claiming ITC on exempt healthcare supplies: Hospitals that provide exempt clinical services cannot claim ITC on medicines consumed in those services. Only medicines sold through hospital pharmacies (as separate taxable supply) qualify.
-
Wrong HSN code on invoices: Using HSN 3004 for unpackaged bulk drugs (which should be 3003) or confusing APIs (Chapter 29) with finished formulations (Chapter 30) creates reconciliation issues in GSTR-1.
-
Missing e-way bill for branch transfers: Pharma companies transferring stock between warehouses or branches must generate e-way bills even for intra-company transfers when value exceeds Rs 50,000.
Let Tax Garden Handle Your Pharma GST
GST compliance for pharmaceutical businesses involves product-wise HSN classification, rate tracking across multiple categories, ITC management with inverted duty structures, and e-invoicing. Tax Garden manages end-to-end GST return filing for pharmacies, distributors, and medical device companies, so you can focus on your business.
Frequently Asked Questions
What is the GST rate on paracetamol and common OTC medicines in 2026?
Paracetamol and all other over-the-counter (OTC) medicines attract 5% GST under HSN 3004. This rate applies to tablets, capsules, syrups, ointments, and all retail-packed formulations since September 22, 2025.
Is GST applicable on insulin in India?
Yes. Insulin attracts 5% GST under HSN 2937. It is classified as a hormone preparation. While it is a life-saving drug, it falls under the 5% category, not the nil-rate category (which covers cancer, HIV, TB, and rare disease drugs specifically listed by the GST Council).
Can a hospital claim ITC on medicines purchased for patients?
Only if the medicines are used for taxable supplies. Healthcare services provided by hospitals are exempt under Entry 74, and ITC on inputs used for exempt supplies is blocked under Section 17(2). However, if the hospital runs a separate taxable pharmacy counter, ITC on medicines sold through that counter is available.
What is the GST rate on Ayurvedic medicines?
Manufactured Ayurvedic, Unani, Siddha, and Homeopathic medicines attract 5% GST under HSN 3003/3004, the same rate as allopathic formulations. Unprocessed raw herbs sold as agricultural produce may be exempt (0%).
Is the Composition Scheme available for medical shops?
Yes. Retail pharmacies with aggregate turnover up to Rs 1.5 crore can opt for the Composition Scheme and pay 1% GST on turnover. However, they cannot claim ITC on purchases, cannot make inter-state sales, and must file CMP-08 quarterly.
What is the GST rate on cardiac stents and orthopaedic implants?
Cardiac stents and orthopaedic implants attract 5% GST from September 22, 2025. Stents were reduced from 12% and knee replacement implants from 18%. Hearing aids remain fully exempt (0%).