Goods and Services tax is compulsory for all businessman or for all the taxpayers. So, in the following section we have briefly explained about GST on pharma sector, what are the actual GST rate on medicines and the major effect of GST on the pharma industry.
New GST Rate on Medicines
What is GST
Have you wondered about what is GST ever? We explain to you regarding this. Now, GST is the highest complicated tax reform of India. It is an individual tax on the stocks of goods and services. GST is a destination based tax. It will subsume Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc. Now we will discuss the components and GST rate on medicines.
Components of GST on Medicines
GST would be levied by both the State and Central government. The dual GST can be categorized as follow –
- Central GST or CGST to be levied by the central government.
- State GST or SGST to be levied by the states and Union Territories with the legislature.
- Union Territory GST or UTGST to be levied by Union Territories without legislature.
- Integrated GST or IGST to be levied by the central government on inter-state supply of goods and services.
GST Council would be responsible for deciding the rates of CGST, IGST and SGST/UTGST with the mutual agreement of both the center and the state government.
Taxes subsumed with the introduction of GST which are currently levied by the center are Central Excise Duty, Special Additional Duty of Customs (SAD), Service Tax, Duties of Excise (Medicinal and Toilet Preparations), Cesses and surcharges applicable so far related to goods and services, Additional Duties of Excise (Textiles and Textile Products), Additional Duties of Excise (Goods of Special Importance) and Additional Duties of Customs (commonly known as CVD). Central Sales Tax, State VAT, Purchase Tax, Entry Tax (All forms), Luxury Tax, Taxes on advertisements, Entertainment Tax (except those levied by the local bodies), State cesses and surcharges applicable so far related to supply of goods or services, Taxes on lotteries & betting and gambling are the taxes levied by the state government would be subsumed with the introduction of GST.
‘NIL’ GST FOR PHARMACEUTICAL PRODUCTS
- Nil for the Human Blood and its components
- Nil for all types of contraceptives
5% GST RATES FOR PHARMACEUTICAL PRODUCTS
Under pharmaceutical Products there comes up some goods with 5% GST rates i.e. Animal or Human Blood Vaccines, there comes up some diagnostic tools for detection of all the types of hepatitis, 5% GST rates for Desferrioxamine deferiprone or injection, then the same will be for such medicaments that don’t hold the brand name & used in bio-chemic systems, 5% for such medicines which subsuming their salts and esters and diagnostic test kits, defined in List 3/List 4 appended to the notification No.12/2012- Customs dated the 17th March 2012, 5% for the products that contain Oral re-hydration salts, Formulations manufactured from the bulk drugs and NIL for Human Blood and its components. NIL for All types of contraceptives.
12% GST RATES FOR PHARMACEUTICAL PRODUCTS
Now we are going to provide you the list of pharmaceutical products that are taxed with 12% includes:
- Under the HSN 3001-12% GST taxed on organs for organo-therapeutic uses, dried whether or not powdered; the extracts of glands or other organs, their secretions for organo-therapeutic uses; herapin and its salts; other human or animal substances prepared for therapeutic, prophylactic uses, not elsewhere specified or subsumed.
- Under the HSN Code no. 3002- the 12% goods that taxed for animal blood prepared for therapeutic, prophylactic or diagnostic uses; antisera and the other blood factions and modified immunological products, whether or not obtained by means of biotechnological processes; toxins, cultures of micro-organisms excluding yeasts and products.
- Under the HSN code no. 3003 – Medicaments that are taxed with 12% GST rates, excluding goods of heading 30.02, 30.05, or 30.06 consisting of two or more constituents which have been blended or unblended products for therapeutic or prophylactic uses, not put up in measured doses or forms or packagings for retail sale, subsuming Ayurvedic, Unani, Siddha, homoeopathic or Bio-chemic systems medicaments.
- Under the HSN Code- 3004: 12% is taxed on the medicaments excluding goods of heading 30.02 , 30.05, 30.06 consisting of blended or unblended products for therapeutic or prophylactic uses, put up in a measured doses including those n form of transdermal administration system or in forms or packagings for retail sale, including the Ayurvedic, Unani, homeopathic siddha or bio-chemic systems medicaments, put up in for retail sale.
- Under the HSN code no. 3005- 12% taxed for Wadding, gauze, similar articles and bandages (for example, adhesive plasters, dressings, poultices), infused or coated with pharmaceutical materials or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes.
- Under the HSN Code 3006- On other which are taxed with 12% Pharmaceutical goods such as Sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns) and sterile tissue adhesives for surgical wound closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or dental adhesion barriers, whether or not absorbable, etc.
18% GST RATES FOR PHARMACEUTICAL PRODUCTS
Under the HSN code no. 30- 18% is taxed on Nicotine polacrilex gum.
Effect of GST on the Pharma Industry
GST can be good or bad for your company. GST rate on medicines which subsume life-saving vital drugs like oral rehydration salts. The maximum GST on bulk drugs is 18% and on formulations and it will be around at 5% & 12% or at maximum. With such positive effects there lies some negative effects like, ayurvedic products that are falling in the slab of 12% to 15% rates. For such effect of GST on pharma Industry either positive or negative, preparation in the advance is the adverse thing to do.
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