GST for pharma distribution

Five per cent, mostly. The exceptions are where the money goes.

Since 22 September 2025 most medicines are 5% and 37 are nil. Left to get right: free-quantity schemes, expiry returns before the credit-note deadline, and licence and batch details.

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5%medicines under 3003 and 3004, most down from 12

37drugs and medicines at nil rate

30 Novemberafter the year of supply: the last day a credit note can cut your tax

Last reviewed 14 October 2026. Rates last checked that day against Notifications 9/2025 and 10/2025-Central Tax (Rate) and the CBIC circulars listed under Sources.

In short

The key points.

5% on medicines, Ayurvedic and homoeopathic too.
Nil on 37 listed drugs, blood and contraceptives.
10+1 on the invoice is one sale at one price.
Samples are not a sale; their credit is blocked.
Expired stock returns on a fresh invoice, or a challan against a Section 34 credit note.

Rates since 22 September 2025

Notification 9/2025, Schedule I, and Notification 10/2025 for nil.

Goods	Entry	GST
Medicines under 3003 and 3004, including Ayurvedic, Unani, Siddha, homoeopathic	Schedule I, 233 and 234	5%, most from 12%
All drugs and medicines, their salts and esters, diagnostic kits and bulk-drug formulations, in Chapter 30 or any other	Schedule I, 226	5%
Insulin and oral rehydration salts	Schedule I, 225	5%
The 37 drugs in Annexure I, mostly for cancer and rare diseases	Notification 10/2025, 113	Nil
Human blood and its components; all contraceptives	Notification 10/2025, 114 and 115	Nil
Job work on Chapter 30 goods	Heading 9988	5%, from 12%

In short: bill from the notification's list of 37, not the press release of 3 September 2025, which counts 33 drugs moved from 12% to nil and 3 from 5% to nil.

Bulk drugs (APIs). The rate on Chapter 29 bulk drugs is not settled. Get your CA's answer in writing.

Selling nil-rated drugs as well as 5% ones? Credit used for both, such as rent, is split under Rule 42, and the nil share reversed.

Invoices before 22 September 2025, and their credit notes, keep the old rate. The NPPA (drug price regulator) told makers to revise MRPs from that date; as reported, re-labelling stock in the market is optional if the patient gets the lower price.

Free quantity, samples and schemes

Circular 92/11/2019: was anything sold?

In short: free strips with paid ones are one sale. Free samples are not, and lose their credit.

Free quantity on a sale. Eleven strips billed for ten is two goods for one price: tax the price charged; keep your credit (ITC: GST you claim back on purchases). Show them on the line with batch and expiry.
A discount printed on the invoice is taken off the taxable value under Section 15(3)(a).
Physician samples and other giveaways are not a supply. Section 17(5)(h) blocks their credit.

Scheme money after the sale. Circular 251/08/2025 of 12 September 2025: a financial or commercial credit note leaves the original tax unchanged, so the buyer reverses no credit. A post-sale discount is not payment for a service unless the dealer does set promotional work. The Finance Act 2026 amends Sections 15(3)(b) and 34 to let a GST credit note carry one; we found no notification bringing that into force.

Expiry returns and credit notes

Circular 72/46/2018 offers two routes; the calendar picks one.

	Route A: return as a fresh supply	Route B: credit note
Document with the goods	Returner's tax invoice, at the original value	A delivery challan
Who adjusts tax	Recipient takes credit on it	Supplier cuts output tax, if the returner has not kept the credit
Deadline	None beyond the usual credit rules	30 November after the year of the original supply, or the annual return if earlier. After that it cannot cut tax
Goods then destroyed	Reverse the credit taken on it	Reverse the credit for making the goods

In short: after the credit-note deadline, use Route A.

A composition dealer returns on a bill of supply, an unregistered chemist on any document, both without tax. The circular says it may apply to other returns, so most distributors use it for near-expiry and breakage. Principals settle late, and a December credit note for last year's supply cuts nobody's tax.

What a drug invoice must carry

GST Rule 46 for tax, Drugs Rules Rule 65 for the licence.

In short: GST does not ask for batches; the Drugs Rules do. Put both licence numbers, batch and expiry on every invoice.

GST needs the usual details and the HSN digits (product code) for your turnover. Under Rule 65(5)(1), a wholesale sale needs a cash or credit memo with:

your name, address and drug licence number;
the date, and the buyer's name, address and sale licence number;
the drug, quantity, batch number and manufacturer;
a competent person's signature.

Keep copies three years. The rule lists batch, not expiry; print expiry anyway, or returns cannot be matched.

E-way bills and e-invoices

No special exemption for medicines.

In short: the general ₹50,000 consignment limit applies, to sales and to expiry returns on a challan.

Rule 138(14) exempts nil-rated goods, but cites Notification 2/2017, which 10/2025 replaced. Confirm with your CA that nil-rated drugs still need none.

E-invoice. Once your turnover has crossed ₹5 crore in any year since 2017-18, every invoice and credit note to a registered chemist needs an IRN from the invoice registration portal. At ₹10 crore and above, report it within 30 days. Above ₹5 crore, invoices carry 6-digit HSN codes.

What Ordence does

Built; no stockist uses it yet.

Dated rates, so an old invoice keeps its old rate.
Batch, expiry and HSN on every invoice line, with free quantity taxed with the sale.
Physician samples on their own document, with the credit to reverse worked out and posted to the books, ready for GSTR-3B (the monthly tax return).
Destroyed stock recorded batch by batch, with the credit to reverse under Section 17(5)(h) posted to the books.
Expiry and breakage returns kept apart and matched to claims.
Returns prepared, not filed. You or your CA file them.

What stockists ask at month end

Three questions, three rules.

Is the free strip in a 10+1 scheme taxed separately?

No. Circular 92/11/2019 treats it as one sale at one price. Tax what you charged; keep the credit.

Our principal settled last year's expiry claim in January. Can the credit note still reduce tax?

No, if the sale was last financial year. Section 34 allows it only to 30 November after that year, or the annual return if earlier. A return on a fresh invoice has no such limit.

Do we need the buyer's drug licence number on the invoice?

Yes, for wholesale. Rule 65(5)(1) of the Drugs Rules requires it.

Bring the expiry claims your principals have not settled.

With the year of each sale. Last year's credit notes cut tax only until 30 November, or the annual return if earlier, so chase those first.