GST Effect And Rates For Healthcare, Pharma And Ayurvedic Medicines

We will examine impact of GST on Pharma Products including Ayurvedic medicines and Healthcare. Goods and Service Tax comes into effect after 30 June 2017 midnight for pharma and all other sectors.

Healthcare was exempted from taxation , so under GST too it has kept under exemption item.
Following services under healthcare have been exempted:
1) Healthcare services by a clinical establishment, an authorised medical practitioner or paramedics;
2) Services provided by way of transportation of a patient in an ambulance, other than those specified above.
Please note above does not include hair transplant or cosmetic or plastic surgery for beautification.
So availing healthcare services will not be costly under new tax regime.

From July 1 , 2017 following GST slabs are applicable on pharma products

GST@NIL :

1. Human blood and its components
2. All types of contraceptives

GST@5%:

1. Animal or human blood vaccines
2. Diagnostic kit for all types of hepatitis
3. Cyclosporin
4. Oral Rehydration Salts
5. Desferrioxamine Injection or Deferiprone
6. Medicines (including veterinary medicines) used in bio-chemichal systems and not bearing any brand name
7. Drugs or medicines specified in the list 3 or 4 of notification 12/2012- central excise
8. Formulations manufactured from bulk drugs listed in the list 1 of notification 12/2012 -central excise

http://www.cbec.gov.in/Excise-Notifications
Most of the drugs mentioned under the 5% bracket are used to cure malaria, HIV-AIDS, tuberculosis, and diabetes which were previously charged VAT around 4%.
GST@12%:

1. All goods not specified elsewhere:
2. Medicines made by mixing two or more constituents for therapeutic or prophylactic uses.
3. (including Ayurvedic medicines)
4. Wadding gauge, bandages, and similar articles
5. Forms or packing for retail sale regarding surgical, dental or veterinary purposes
6. Pharmaceutical goods specified such as sterile laminaria, dental adhesion barriers etc.

GST@18 %
Nicotine polacrilex gum is the only pharmaceutical product to be charged at the rate of 18%.

No clarification has been provided by the government on the issue of manufacturers operating in excise-free manufacturing zones paying more tax under GST. Most of these manufacturers are competitive in the pharmaceutical industry is due to the excise benefit as they are situated in remote places.

Earlier, Ayurvedic drugs or medicines were charged an average VAT of 4% and excise of 1.5% due to the excise free manufacturing zone benefit. Ayurvedic medicines and products have a total tax incidence of 7 per cent, including VAT, depending on the items. Under the GST regime, these items have been kept at 12 per cent alongwith allopathic formulations. This has disappointed the Ayurveda products industry.

GST has kept healthcare services under exception. GST also has not changed drastically the tax rates for pharmaceutical products and is only slightly raised for formulations from about 11 percent to 12 percent, so effect on prices other than ayurvedic products is expected to be slight . Further prices depends upon other things like cost of technology and raw products under GST. So currently it is premature to predict prices convincingly. However GST will organize the tax structure making it convenient and this is big positive .