Cancer, rare disease medicines exempted from GST, other drugs at 5%; check FAQs

Finance Minister Nirmala Sitharaman announced that GST on 33 life-saving drugs and medicines has been reduced from 12% to zero. “Three life-saving drugs and medicines used for the treatment of cancer, rare diseases, or severe chronic diseases have come down from 5% to zero. There are several drugs and medicines that have been reduced from 12% to 5%,” the Finance Minister said.

FAQs on GST rate restructuring for medicines

> What is the GST rate on medicines?
All drugs/medicines have been prescribed a concessional GST rate of 5%, except those specified at nil rate.

> Why have all medicines not been exempted from GST in general?
If medicines are fully exempted, manufacturers/dealers cannot claim input tax credit (ITC) on GST paid for raw materials and must reverse ITC already paid. This would increase their effective tax incidence and production costs, which may then be passed on to patients through higher prices—making the exemption counterproductive.

> Does the 5% GST rate apply to all medical devices?
Yes, the 5% rate applies to all medical devices, instruments, and apparatus used in medical, surgical, dental, and veterinary practices, except those specifically exempted.

> Why has the GST rate been reduced on medical devices? Will this not lead to inverted duty structure?
The reduction aims to lower healthcare costs and benefit patients, especially the poor. While this may deepen the existing inverted duty structure, GST law already allows refunds of accumulated ITC on such structures. The GST Council has also recommended process reforms to enable faster refunds.