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GST Rate and HSN Code for Pharmaceutical and Medicine

This guide gives you detailed information about the medicine GST rate and the medicines HSN code. Everybody knows about GST but might not be aware of the HSN and SAC, which are the compulsory fields in a GST compliant invoice

HSN- Harmonized System of Nomenclature is a new concept for most businesses, especially in the pharmaceutical industry. HSN is an internal system used for naming goods. The goods are arranged in a hierarchical order, and the HSN is assigned to these goods accordingly. 

HSN numbers are 8 digits long, and depending on the turnover or based on the nature of sales, it might be only required to quote a 2, 4, 6, or 8 digits HSN. But, keep in mind that 8 digit HSN is mandatory for exporting the goods. 

What is the GST rate on medicines?

GST rate on medicine can vary depending on the medicines and the medical supplied, and usually, the rates can be Nil. 5%, 12% and 18%. For any blood and its by-products, the GST is Nil and also for the contraceptives. 

The minimum GST rate on medicines of 5% is charged on live-saving medications such as medicines and vaccines for diabetes, malaria, tuberculosis, and other similar diseases. The highest GST rate of 18% is charged on medicines like nicotine gums and other products containing nicotine polacrilex.

Why myBillBook requires medicine HSN code to generate invoice 

medicine HSN Code can classify more than 5000 products that are organized in a permissible and logical arrangement. The HSN is accepted all around the world and is supported by well-defined rules. It is used for taxation to assist in finding the rate of tax that is relevant to a particular product in a country. Besides, the HSN code is also used in calculating certain taxations that involve claiming benefits. Also, this code is very important for importing and exporting medicinal products. This code can help in determining the quantity of the products as well. The major significance of using HSN is easy collection of international trade statistics, provision of a rational basis for customs tariffs, and uniform classification of the pharmaceutical products.

An HSN number will be given for every product in every country and the HSN number stays the same for almost any product. This HSN code should be mentioned on the GST Invoices accurately without any fail. If you use the HSN codes, you will not need to upload all the detailed descriptions of every medicine that falls under the GST. This saves time and money for the tax authority. 

Therefore just enter the HSN code in myBillBook and generate your invoice in a hassle-free manner. 

Top 5 benefits of medicine GST rate for businesses 

  1. When the GST was introduced on medicine and other pharmaceutical products, the supply process became more streamlined. 
  2. This could help many companies in reducing the cost of warehousing as they could employ a hub and spoke model.
  3. GST can also assist in optimizing the benefit of Input Credit under the GST. 
  4. Likewise, the GST could bring together a variety of indirect taxes that simplifies the taxation process for the products and services.
  5. In the long run, it is assumed that the rate for products will be decreased because of the GST. Another importance of GST is to reduce corruption and sales without receipts, and it also brings accountability and regulation.

How to find drugs and medicines HSN code for GST?

The HSN codes are divided into 21 sections and 99 chapters. It will also have 1244 headings and 5224 subheadings. Every section of HSN will include a collection of different chapters. When it comes to chapters, it will represent a particular class of goods which are again divided into several headings based on the types of goods. The products will be mentioned in the headings which are allotted as an HSN code. 

So, in order to find the HSN code for GST follow the steps given below 

  • Select the sections and then filter the subheading. 
  • Then you will receive the product code. For instance, if you are looking for an HSN code of Penicillin, it will show like this – 3004 10 10. 

There are many online websites that can be used to find the HSN of medicine very quickly. You just have to enter the name of the product on the HSN finder website and click search.  

FAQs

  1. What is HSN Code?

The full form of HSN is Harmonised System Nomenclature which is generally a code (numbers). This code is used to classify the various products under the GST Act. HSN code is accepted and used globally and it usually has 8 digits. 

  1. What do the HSN code numbers indicate?
  • The first two digits in the HSN code are the chapter that depicts the category of goods. These chapters are divided into numerous headings which are done based on the types and nature of goods. 
  • The second two digits mentioned on the HSN code represent the HS heading. 
  • These headings are additionally divided into subheadings which are the third two digits. 
  • The product number is the last two digits. 
  1. For what kind of companies is HSN mandatory for GST invoices?

From April 1st, 2021, all the taxpayers with a total annual income of more than 5 crores in a financial year must mention the 6 digit HSN code in all the tax invoices. Now when it comes to taxpayers whose annual incomes are up to Rs.5 crores in a financial year will have to mention 4 digits of the HSN code for all the goods and services in BRB Tax invoices. They also have an option to state the 4 digits of the HSN code for goods and services in B2C tax invoices too. Moreover, the taxpayers who conduct export supplies must mention 8 digits HSN code for any supplies made to B2C as well as B2B.

  1. What happens when the HSN code is mentioned incorrectly?

When you mention the HSN code for a product, you must be very careful. Always cross-check the code you have entered again to make sure that you have entered the accurate HSN code. If the code is mentioned incorrectly, then you will be charged a penalty of Rs50, 000. This amount is divided into two which are 25,000 for CGST and 25,000 for SGST. Apart from this penalty, you might also be charged under Section 125 of the GST Act for not mentioning or mentioning the wrong HSN code.

  1. What are SAC numbers and what is the SAC code used for?

SAC or Service Accounting Code is a system developed by the Service Tax Department of India to classify the services. It is a 6 digit code and the first two digits will be the same for all kinds of services. The core nature of the services can be found in the next two digits of the code. Whereas, the last two show the detailed nature of service.

  1. How to find the HSN code of a product?

First, select the chapter and then choose the heading. At last, you must select the subheading and you will get the product HSN code. 

These are the basic information you must know about the medicine GST rate and the HSN code. Be very careful when entering the HSN code in myBillBook to avoid any kind of additional levies. But stay assured to generate the right invoice with myBillBook.

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