GST on medicines: rates, HSN codes and billing at MRP

The rate: always from the supplier’s invoice

Since 22 September 2025 most medicines carry 5% GST, and a list of life-saving medicines is nil-rated. Some products a pharmacy sells — cosmetics, devices, food and drinks — carry other rates.

The safest rule: use the rate on your supplier’s invoice for each product, and set it once in your billing software so every bill uses the same rate.

HSN codes on the bill

Medicines are classified under HSN chapter 30 (for example 3004 for medicaments in measured doses). How many digits you must print depends on your turnover:

• Turnover up to ₹5 crore: 4-digit HSN on bills to registered buyers (B2B)
• Turnover above ₹5 crore: 6-digit HSN on every bill
• Copy the HSN from the supplier’s invoice

Working out the tax inside the MRP

Because the MRP includes GST, the taxable value is the MRP divided by (1 + rate). The rest is tax, split equally into CGST and SGST for a sale in your own state.

Example: a strip at ₹105 MRP with 5% GST has a taxable value of ₹100 and ₹5 of tax — ₹2.50 CGST and ₹2.50 SGST. A discount is taken off the price first, then the tax is worked out on what the customer pays.

B2B bills and the monthly return

When you sell to a clinic, nursing home or another shop that has a GSTIN, put their GSTIN on the bill — it is reported separately as B2B. At month-end your CA needs HSN-wise sales, B2B bills, rate-wise tax and your purchases with each supplier’s GSTIN.

The composition scheme

A small retailer can choose the composition scheme instead: a fixed low tax on turnover, no tax collected from customers and a bill of supply instead of a tax invoice, but no input tax credit on purchases. The turnover limit and rules are set by the GST council — ask your CA whether it suits your shop.