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The 56th meeting of the GST Council held in New Delhi under the chairpersonship of the Union finance & corporate affairs minister Nirmala Sitharaman has recommended reduction of Goods and Services Tax (GST) rate for all drugs and medical devices to 5%, and waiver of GST for 36 lifesaving drugs.
This is part of the overall GST reforms recommended by the GST Council, in line with the Prime Minister Narendra Modi's announcement in his Independence Day Speech regarding the government's intention to bring in "Next-Generation reforms in GST". The changes in GST rates will be implemented with effect from 22nd September 2025.
The Council recommended waiver of GST for three lifesaving medicines - Agalsidase Beta, Imigluicerase, and Eptacog alfa activated recombinant coagulation factor VIIa from the existing 5%, while the rate of 33 other lifesaving medicines were reduced from 12% to 5%. These drugs are used for treatment of cancer, rare diseases and other severe chronic diseases.
These drugs include onasemnogene abeparvovec, asciminib, mepolizumab, pegylated liposomal irinotecan, daratumumab, daratumumab subcutaneous, teclistamab, amivantamab, alectinib, risdiplam, obinutuzumab, polatuzumab vedotin, entrectinib, atezolizumab, spesolimab, velaglucerase alpha, agalsidase alfa, among others.
The Council also recommended reduction of GST from 18% to 5% on various medical apparatus and devices used for medical, surgical, dental or veterinary usage or for physical or chemical analysis and reduction of GST from 12% to 5% on various medical equipment and supplies devices such as wadding gauze, bandages, diagnostic kits and reagents, blood glucose monitoring system (Glucometer) medical devices, etc.
Addressing a question on why all medicines are not exempted from GST in general, the Ministry of Finance said, that if drugs and medicines are fully exempted, the manufacturers or dealers would not be able to claim input tax credit on GST paid on raw materials and will have to reverse the ITC paid on the inputs.
"This would increase their effective tax incidence and cost of production. This may in turn be passed on to consumers/patients in the form of higher prices which in turn would make the measure counterproductive," said the Ministry.
The rate of 5% applies on all medical devices, instruments, apparatus used in medical, surgical, dental and veterinary uses other than that are exempted specifically.
On a question on whether reduction of GST rate for medical devices may lead to inverted duty structure, the Ministry said that the measure is intended to lower the cost of healthcare and thereby benefit patients, particularly the poor.
"This measure does not create any new inverted duty structure as the existing structure already had inverted duty structure although this measure may deepen the inversion. However, under GST, refund of accumulated input tax credit arising on account of inverted duty structure is available to manufacturers. GST Council has also recommended process reforms to enable expedited refunds," it added.
It may be noted that the medical devices industry has been demanding rationalisation of GST rates for the medical devices in the country, in order to address certain difficulties faced by the industry in terms of taxes, and to benefit the patient population.
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