Latest GST Update 2025: Impact of GST on the Pharma Industry
The GST reforms rolled out in September 2025 represent one of the most consequential indirect tax restructurings in recent years.Goods and Services Tax (GST) reforms are set to be implemented from September 22, marking a historical shift in the country’s indirect taxation with two slabs of 5 per cent and 18 per cent and a special slab of 40 per cent for sin goods. For the pharmaceutical sector — a critical public-health industry that supplies everything from everyday generics to life-saving specialty medicines — the changes promise lower tax burdens for many products, potential price relief for patients, and important operational questions for manufacturers, distributors and retailers. Most medicines and medical devices will now attract only 5% GST, while individual health and life insurance premiums are completely exempt. Below I explain the changes that impact different pharma distributers, and outline what companies such as Watran Pharmaceuticals should do now to capture the upside and stay compliant.
Medicines: Uniform 5% Slab For Most Drugs
All other medicines and drugs have shifted to 5% GST, down from the earlier 12% or 18% slabs. Essential, life-saving drugs (including those for cancer, HIV, and TB) continue to remain fully exempt. For chronic disease patients who buy medicines monthly, this could mean savings of several hundred rupees a year. Pharmacies must update bills to reflect the new rate, even if older stock carries a higher MRP.
Implementation date and rules:
Old Structure
5%, 12%, 18%, and 28%
New Structure
5% (essentials), 18% (standard goods and services), and 40% (sin and luxury goods)
Opportunities for Pharma Distributors After GST Update 2025
1. Improved Profit Margins
With medicines moving from 12%/18% to 5% GST, and life-saving drugs now at 0% GST, distributors can reduce their tax burden.
2. Increased Demand & Sales Volumes
Affordable prices (due to lower GST) mean higher patient demand for essential and chronic medicines.
Distributors can expand their sales volume without proportionally increasing costs.
FAQ
Q1 Which medicines are included under 0% GST?
The 0% GST rate applies to certain life-saving medicines such as cancer drugs, rare disease therapies, and selected chronic-care medicines.
Q2 From when are the new GST rates applicable?
The new GST rates are applicable for all supplies made on or after 22nd September 2025.
Q3. How does this GST update benefit patients?
With reduced GST, the cost of medicines will go down.
Q4 What are the long-term impacts of GST 2025 on the pharma industry?
- Increased affordability for patients.
- Higher demand and sales volumes for distributors.
- Stronger compliance requirements for manufacturers.
- Potential growth in rural and semi-urban markets.
