GST on medicines and pharmacy sales in a clinic

The same strip of tablets can be tax-free or taxable depending on who it's for and how it's given. That sounds like a loophole. It isn't. It's the difference between medicine as part of treatment and medicine sold as a product.

The in-patient rule: part of the treatment

When a patient is admitted and medicines, consumables, implants, or stents are used while treating them, that's a composite supply. The medicine rides along with the healthcare service, and the healthcare service is exempt. So it's exempt too.

This isn't a guess. Advance Ruling authorities in Kerala and Tamil Nadu both held that medicines and consumables supplied to in-patients during treatment fall under the healthcare exemption in entry 74 of Notification 12/2017. The medicine is not a separate sale; it's part of the care.

The counter rule: a retail sale is taxable

Now change one thing. A walk-in buys medicine over the counter, or an out-patient picks up a strip on the way out that wasn't given as part of a procedure. That's a supply of goods. It's taxable, at the rate that applies to that medicine, and it carries an HSN code on the bill.

So a clinic with an in-house pharmacy is usually doing both at once: exempt medicine inside treatment, taxable medicine across the counter.

What rate applies?

Since the September 2025 GST overhaul, almost all medicines are taxed at a uniform 5%, and a set of notified life-saving drugs is nil-rated. A few specialised items can sit elsewhere, so it's still worth confirming each product's current rate against its HSN rather than assuming. Our HSN/SAC guide covers how to find and apply the code.

The credit most clinics forget

There's an upside to the taxable side. Once you're registered and selling taxable medicines, you can claim input tax credit on the GST in your purchase invoices for that stock. The tax you paid your distributor offsets the tax you collect at the counter. Credit isn't available on the exempt side, so a clinic running both keeps the two apart in its books.

Common questions

Are discharge medicines exempt?

Medicines used during admission are part of the composite supply and exempt. Take-home medicines billed as a separate retail sale at discharge can be a different case. This is a grey area worth a CA's read for your setup.

Does a pharmacy bill need HSN codes?

For taxable medicine sales, yes. The HSN code and the rate belong on the line.

We only dispense during treatment, never retail. Are we taxable?

If every medicine you hand out is part of treating an admitted patient, it rides with the exempt care. The moment you sell a strip as a standalone product, that sale is taxable.

How Avinya Plus handles it

In Avinya Plus, each catalogue item carries its own tax status and HSN code, so medicine dispensed inside a procedure and medicine sold at the counter are billed correctly without sorting it by hand. Taxable lines split into CGST + SGST or IGST and print on an A4 invoice or 80mm thermal receipt.

This is general information, not tax advice. GST slabs on medicines were rationalised recently and AAR rulings bind only their applicant. Confirm rates and your clinic's position with a chartered accountant.