Key takeaways
What this article covers, in order:
- What rates apply in a medical store now?
- How does GST work with MRP pricing?
- Should a pharmacy be on composition?
- Expired medicines and your ITC
- Worked example: Shree Medicals, Lucknow
- Quarterly filing for chemists
The distributor's van has just dropped off a carton of returns paperwork, a box of expired strips is waiting to go back, and a regular customer is asking why her blood pressure tablets got cheaper last year. Medical store GST has its own quirks: MRP-inclusive pricing, a big rate change in 2025, and expiry write-offs that quietly affect your credit. If your pharmacy is registered as a regular taxpayer, HelloBooks files GSTR-1 and GSTR-3B for one GSTIN free, directly to the GST portal. Here's what a chemist needs to know.
What rates apply in a medical store now?
The GST 2.0 changes on 22 Sep 2025 moved most medicines down from 12% to 5%. A list of specified life-saving drugs became fully exempt. Here's roughly how a typical counter breaks down:
| Product | Rate since 22 Sep 2025 |
|---|---|
| Most medicines and formulations (HSN 3003/3004), including many OTC drugs | 5% |
| Specified life-saving drugs listed in the CBIC exemption notification | Nil |
| Ayurvedic, Unani, Siddha and homeopathic medicines | 5% |
| Many medical devices and diagnostic kits | 5% (check HSN) |
| Toothpaste, soap and some personal-care items | 5% |
| Many cosmetics and other FMCG lines | 18% (check HSN) |
The exact rate depends on the 8-digit HSN code and, for some drugs, the exemption list. Check doubtful items in the HSN/SAC finder or the CBIC notification. Don't rely on the rate printed on an old stock invoice.
How does GST work with MRP pricing?
You sell at MRP, and MRP includes GST. So the GST you owe is backed out of the MRP:
Taxable value = MRP ÷ (1 + rate)
For a strip with an MRP of ₹105 at 5%, the taxable value is ₹100 and the GST is ₹5. Billing software does this automatically, but if you summarise sales by hand from a cash book, use the formula. Charging 5% on top of MRP is both illegal and a common customer complaint.
Should a pharmacy be on composition?
Many small chemists use the composition scheme, which is open to traders up to ₹1.5 crore of turnover at 1% of taxable turnover. It's simpler, and walk-in customers don't need tax invoices. HelloBooks doesn't file composition returns (CMP-08 and GSTR-4).
The regular scheme tends to suit a pharmacy that supplies clinics, nursing homes or hospitals that want tax invoices, one that buys from registered distributors and wants the ITC, or a store that plans to sell online or across a state border. After the rate cut, the gap between 1% composition and 5% regular-minus-credit is smaller than it used to be. Run your real numbers with a CA before deciding.
Expired medicines and your ITC
This is the pharmacy-specific trap. When stock expires, one of two things usually happens.
In the first case, the distributor takes it back and issues a credit note. If it's a GST credit note, your ITC on that stock reduces. If it's a "financial" credit note without GST, your ITC stays as it was. Either way, enter it.
In the second case, you destroy or write it off yourself. Section 17(5)(h) blocks ITC on goods that are lost, destroyed or written off. So you must reverse the ITC you originally claimed on that stock. Many small stores skip this, and an audit or notice picks it up later.
The same logic applies to free samples you hand out from purchased stock. The ITC on those isn't available either.
A related point from the 2025 rate change: some pharmacies still carry credit from stock bought at 12% before 22 Sep 2025. That credit stays in your ledger and gets used against future output tax. A refund for the same goods simply because the rate fell is generally not available, so ask your CA if you have a large balance sitting idle.
Worked example: Shree Medicals, Lucknow
Anil runs a neighbourhood pharmacy with a small clinic supply business. He's a regular taxpayer filing monthly. Here's Oct 2026 (illustrative):
Sales
| Collected | Taxable value | GST | |
|---|---|---|---|
| Medicines at 5% (MRP-inclusive) | ₹5,25,000 | ₹5,00,000 | ₹25,000 |
| Exempt life-saving drugs | ₹20,000 | ₹20,000 | ₹0 |
| Cosmetics and other 18% items (MRP-inclusive) | ₹47,200 | ₹40,000 | ₹7,200 |
| Tax invoices to a local clinic (5%) | ₹52,500 | ₹50,000 | ₹2,500 |
| Output tax | ₹34,700 |
Purchases from distributors (all in GSTR-2B) carry ₹21,000 of GST on 5% medicines and ₹5,400 on 18% goods, so ₹26,400 of ITC.
Expired stock written off: ₹10,000 at cost, originally bought at 5%. That means ₹500 of ITC to reverse.
Anil's cash payable is ₹34,700 − ₹26,400 + ₹500 = ₹8,800, split between CGST and SGST. GSTR-1 is due 11 Nov 2026 and GSTR-3B 20 Nov 2026.
The ₹50,000 to the clinic goes into GSTR-1 invoice by invoice, so the clinic can claim credit. The counter sales go in as a rate-wise B2C summary.
Quarterly filing for chemists
A pharmacy under ₹5 crore can opt for QRMP. That means quarterly GSTR-1 (by the 13th after the quarter) and GSTR-3B (by the 22nd or 24th, depending on your state), with monthly tax through PMT-06 by the 25th. If clinics want their invoices monthly, upload them through IFF.
Is the free plan enough for a pharmacy?
HelloBooks Free allows 200 transactions a year. A medical store makes dozens of bills a day, so here's the honest picture.
Entering every counter bill isn't realistic on Free. If you post monthly rate-wise sales summaries from your pharmacy billing system, plus clinic invoices and distributor bills, a small store with a few distributors might fit. Most pharmacies, with 5 to 10 distributors billing weekly, will cross 200 within the year.
That's when Pro at ₹499/month is worth it. You get unlimited transactions, unlimited users (your pharmacist and your CA), and GSTR-9 generated ready to file. Pro also covers every GSTIN of one legal entity if you open a branch in another state. See the pricing page.
How HelloBooks helps
HelloBooks files GSTR-1 and GSTR-3B directly to the GST portal from inside the app. GSTR-2B reconciliation flags distributor bills that haven't reached 2B, which is common with smaller stockists. AP aging keeps distributor payments inside 180 days so you don't have to reverse ITC under Rule 37. UPI, Paytm and PhonePe collections can be reconciled, and bank statement import covers the rest. Before you file GSTR-3B, you see the GST portal's own late fee and interest. And your CA can review expiry reversals in the same books.
Pharmacy GST checklist
- [ ] Update every item's rate for the GST 2.0 changes and the nil-rated drug list
- [ ] Back GST out of MRP; never add it on top
- [ ] Give clinics and hospitals proper tax invoices with their GSTIN
- [ ] Record distributor credit notes for expiry returns
- [ ] Reverse ITC on stock you destroy or write off
- [ ] Reconcile GSTR-2B before filing GSTR-3B
- [ ] Pay distributors within 180 days
FAQs
What is the GST rate on medicines now?
Most medicines have been at 5% since 22 Sep 2025, and specified life-saving drugs are nil-rated. Always check the HSN code and the exemption list.
Do I add GST to the MRP?
No. MRP includes GST. Work out the taxable value as MRP ÷ (1 + rate).
Do I have to reverse ITC on expired medicines?
If you destroy or write off the stock yourself, yes, under Section 17(5)(h). If the distributor takes it back with a GST credit note, your ITC reduces through that credit note.
Can HelloBooks file for a composition medical store?
No. HelloBooks files GSTR-1 and GSTR-3B for regular taxpayers, not CMP-08 or GSTR-4.
Is HelloBooks Free enough for my pharmacy?
Only if you post monthly sales summaries and have few distributor bills. Most busy stores will need Pro at ₹499/month.
Sort out your rate master and your expiry reversals, and a chemist's GST return is mostly a matter of matching your distributors' bills.
Start free — GST filing included, no card. Try HelloBooks Free
