Understanding CGST and SGST on Medicine Sales — Pharmacy Owner’s Guide

Every pharmacy invoice carries a small tax calculation that confuses new owners: why two taxes on one line? Why does a shipment to another state show one tax? Here is the complete, plain-language guide to CGST, SGST and IGST on medicine sales.

Place of Supply Decides Everything

If the buyer is in your state, the supply is intra-state: CGST + SGST apply. If the buyer is in another state, it is inter-state: IGST applies. For a retail counter this almost always means: walk-in customers get CGST+SGST; a B2B despatch to another state gets IGST.

Intra-State: The CGST + SGST Split

The rate splits into two equal halves. Since 22 September 2025 most medicines are at 5%, which becomes 2.5% CGST (to the Centre) + 2.5% SGST (to the State).

The old 12% slab (6% + 6%) no longer exists — if your bills still show it, your item master needs updating.

Inter-State: IGST

One tax at the full rate: ₹1,000 at 5% carries IGST of ₹50. Behind the scenes that IGST is apportioned between Centre and State — but on your invoice it is a single line.

How It Must Look on Your Invoice

• HSN code and taxable value per line.
• Rate and amount of CGST/SGST (or IGST) per line — or per slab in a summary.
• Your GSTIN and, for B2B, the buyer's GSTIN with correct state code.
• Exempt lines shown as exempt — never folded into taxable turnover.

Three Edge Cases at a Chemist Counter

1. Mixed-rate bills: one patient buys a 5% formulation, a nil-rated life-saving drug and an 18% product — each line keeps its own split; never average.
2. Union Territories: some UTs levy SGST; others use UTGST — your software should follow the place of supply configuration.
3. Hospital-attached counters: exempt healthcare services (consultation, diagnostics, qualifying room rent) must not attract GST at all — mixing them into taxable lines distorts both GSTR-1 and 3B.

A Mixed-Rate Pharmacy Bill, Worked Out

Customer pays ₹828.00. In GSTR-1, the ₹200 goes in the 5% line, the ₹100 in the 18% line and the ₹500 in nil-rated supplies.

FAQ

• Do I charge GST on MRP or selling price? On the taxable value you charge (the selling price), which may never exceed MRP.
• What about sales returns? Credit notes reverse the same tax components that were charged — CGST/SGST reverse as CGST/SGST.
• Is the composition scheme good for pharmacies? It is worth recalculating. Composition dealers (traders up to ₹1.5 crore turnover) pay 1% of turnover but cannot claim ITC, cannot collect GST from customers and cannot make inter-state supplies. With most medicines now at 5%, the ITC you give up is smaller than before — run the numbers with your CA.

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