Impact of New HSN Rule and GST on Pharmaceuticals +91-7206070155

GST: Goods &Services Tax Law in India is an absolute, multi-stage, residential tax imposed on any additional fee. In other words, tax on the supply of goods and services is an indirect tax. GST legislation has substituted many of India’s previous indirect tax laws

The tax was applied on 1 July 2017, when Prime Minister Narendra Modi introduced 101 changes to the Indian Constitution.

GST A meandering tax system that requires, through the sale, output, and usage of goods and services, financial credit expenditure produced on a national basis, mainly in firms, industries, and services. The primary aim is to abolish state and central government tax levies. Three phases are involved:

1. State GST (SGST) levied by state
2. Central GST (CGST) levied by center
3. Integrated GST (IGST) levied by the central government on inter-state supply of goods and service

Drug Price Control Order (Dpco)

The Essential Commodities Act provides a Drug Price Check to ensure that the prices of vital pharmaceutical goods which are insignificant quantities demanded are measured in a manner that is fairly priced for each user. It was in 1970 that the government understood that pharmaceutical goods and corporations made the sick results of high profitability

Calculation of Retail Price of Formulation

Before GST: In compliance with the following formula, the retail price of a formula shall be determined by the state:

R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED

After GST:

GST = (MRP)/ (1 + (GST %/100)) or GST= (MRP x 100) / (100 + GST %)

The government shall, in compliance with this method, measure the retail price of a formula after GST

GST Rate for Medicines

At its meeting held on 3 June 2017, the GST Council on medicinal products was agreed upon. GST is collected in 5 separate rates, namely Zero, 5%, 12%, 18%, and 28% based on the Article’s HSN code. The 37th Chapter of the HSN Code classifies drugs and pharmaceuticals.

Nil GST Rate Medicines

GST-free is the following medical products and prescription products:

• Human Blood and its components
• All types of contraceptives

5% GST Rate

In the following groups of HSN, goods will be charged at the GST rate of 5%:

• Animal or Human Blood Vaccines
• Diagnostic kits for detection of all types of hepatitis
• Desferrioxamine injection or deferiprone
• Cyclosporin
• Medicaments (including veterinary medicaments) used in bio-chemic systems and not bearing a brand name
• Oral rehydration salts
• Drugs or medicines including their salts and esters and diagnostic test kits
• Formulations manufactured from the bulk drugs

12% GST Rate

The following types of medicinal products and pharmaceutical products are taxed at a GST rate of 12%:

• Organs for organo-therapeutic uses;
• extracts of glands or other organs or their secretions for organo-therapeutic uses;
• heparin and its salts; other human or animal substances prepared for therapeutic or prophylactic uses, not elsewhere specified or included
• Animal blood prepared for curative, prophylactic, or diagnostic uses;
• antisera and other blood fractions and customized immunological products, whether or not obtained employing biotechnological processes;
• Toxins, cultures of microorganisms (not including yeasts), and similar products.
• Medicaments consisting of two or more constituents, who have been mixed for therapeutic or prophylactic uses, not put up in measured doses or forms or packings for retail sale, including Ayurvedic, Unani, Siddha, homeopathic or Bio-chemic systems medicaments.
• Medicaments consisting of mixed or unmixed products for curative or prophylactic uses put up in measured doses (as well as those in the form of transdermal administration systems) or forms or packings for retail sale, including Ayurvedic, Unani, homeopathic Siddha or Biochemic systems medicaments, put up for retail sale.
• Wadding, gauze, bandages, and similar goods (for example, dressings, adhesive plasters, poultices), impregnated or layered with pharmaceutical substances, or put up in forms or packings for retail sale for medical, surgical, dental, or veterinary purposes.
• Pharmaceutical goods such as Sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns) and sterile tissue adhesives for surgical cut closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or dental adhesion barriers, whether or nonabsorbable, etc.
• Waste pharmaceuticals.

18% GST Rate

The other prescription or drug product levied at 18% GST is Nicotine polacrilex gum. No 28% GST was charged for pharmaceuticals or medicinal products. Hence, the maximum applicable GST rate for medicines is 18%.

HSN Code and GST Rate for Pharmaceuticals and Medicines

The HSN is an 8-digit code that identifies the effective rate of GST for various products according to the GST regulations. HSN is the harmonized system of nomenclature. Where an enterprise has revenue up to INR 5 in the preceding financial year, the HSN code is required when providing invoices for up to four digits. If an organization has earnings above 5 Cr then the 6-digit HSN code is required for the invoice provisioning of products.