The ayurvedic products such as hair oil, conditioners, face serums, etc. licenses issued under the AYUSH scheme do not make them medicaments which attract 12 per cent GST and are still considered cosmetics that have to be levied with 18 per cent GST.In India, the Goods and Services Tax (GST) on medicines, including Ayurvedic medicines, is determined by the classification of the product under specific categories based on their use and ingredients. The GST rates for medicines are structured to accommodate the essential nature of pharmaceuticals and to ensure that healthcare remains accessible to all.
GST Rates for Pharmaceutical Products:
- 0% GST: Certain essential drugs, including some life-saving drugs and those used for specific medical conditions, are exempt from GST.
- 5% GST: Most of the common medicines, including many Ayurvedic medicines that are used for general health benefits, are taxed at a lower rate of 5%. This is to ensure that essential drugs remain affordable for the general population.
- 12% GST: Some specialized drugs that are not considered essential but are important for health care, including certain Ayurvedic preparations that do not qualify for the lower rate, are taxed at 12%.
- 18% GST: A higher rate is applied to some pharmaceutical products that are considered less essential or luxury in nature. This category rarely includes medicines and is more often applied to cosmetics and similar products.
Specifics for Ayurvedic Medicines
- 5% GST is applied to traditional Ayurvedic medicines that are purely composed of herbal ingredients and are commonly used for health preservation and minor ailments.
- 12% GST may apply to proprietary Ayurvedic medicines, which are formulations marketed under a brand name and may include some non-herbal ingredients.
- Pure Ayurvedic Medicines:
- 5% GST: Traditional Ayurvedic medicines that consist entirely of natural ingredients, such as herbs and minerals, fall under this category. These are generally formulations that follow classical Ayurvedic texts and are not branded or patented. They are considered essential for maintaining health and are therefore taxed at a lower rate.
- Proprietary Ayurvedic Medicines:
- 12% GST: This category includes Ayurvedic products that are marketed under a specific brand name and might include some modern ingredients or proprietary blends that deviate from classical recipes. These are considered less essential than purely traditional formulations and thus attract a higher tax rate.
HSN Codes for Ayurvedic Products
- HSN Code 3003: This code is used for medicaments (excluding goods of heading 3002, 3005, or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale, including Ayurvedic, Unani, Siddha, or homoeopathic medicines.
- HSN Code 3004: This code is specifically for medicaments (excluding goods of heading 3002, 3005, or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale, including Ayurvedic, Unani, Siddha, or homoeopathic medicines.
Indirect Impact through Input Tax Credit
- Input Tax Credit (ITC): One of the key features of GST is the input tax credit, which allows manufacturers to claim credit for the tax paid on inputs (raw materials, services, etc.) used in the production of Ayurvedic medicines. This can reduce the overall cost of production, as manufacturers can offset these credits against their output tax liability. However, to fully benefit from ITC, manufacturers need to ensure that their suppliers are also GST-compliant, which can be challenging, especially in a sector that may include small-scale and traditional suppliers.
- Increased Compliance Costs: While the input tax credit system is beneficial, it also requires strict compliance and documentation. For smaller Ayurvedic manufacturers, these increased compliance costs can offset some of the benefits of the input tax credit, potentially leading to higher prices if these costs are passed on to consumers.
FAQs
Q1. What should manufacturers know about GST ompliance in Ayurveda product manufacturing?
In Ayurveda product manufacturing, compliance with GST involves accurate classification of products, timely tax filing, and maintaining detailed transaction records. Manufacturers must ensure all medicinal products are classified correctly under the right GST rates to avoid penalties and ensure smooth business operations.
Q2. What are the GST rates for Ayurvedic medicaments?
Ayurvedic medicaments are generally taxed at two different GST rates. Traditional Ayurvedic medicaments composed solely of natural ingredients are taxed at 5%, aimed at preserving affordability for these health essentials. Proprietary medicaments, which may include modern or non-herbal medical ingredients and are sold under a brand name, are taxed at 12%.
Q3. Are life-saving drugs exempt from GST?
Yes, life-saving drugs are generally exempt from GST to ensure they remain affordable for patients.
