GST Rates for Hormones & Related Compounds: A Complete Guide With the implementation of the Goods and Services Tax (GST) in july 2017, the whole face of the Indian system of indirect taxes has changed, including the pharmaceutical industry. The purpose of implementing the GST regime in the market was to minimize different taxes to a single tax for a seamless supply chain without any cascading effect of taxes. Understanding Hormones and Related Compounds Hormones are bioactive molecules that have a role in assisting the facilitation of several physiological functions in the human body: for example, growth, metabolism and reproduction.
In the pharmaceutical field, hormones are naturally produced or extracted from a source that could be an animal or a human being or chemically produced.
The pharmaceutical industry has always proved to be a complex area concerning taxes, as it comprises a series of chemical compounds, drugs, and formulation items.
These commodities include hormones & related compounds which have great importance in context to their medical application as well as their application in the market. Starting from their life-saving nature in context to their application in the supply of insulin in the market to their application in context to reproductive health & growth hormones, such commodities have their prime importance in today’s modern market related to the medical sector.
Medical and Industrial Utility The hormone compounds are not limited to the final processing of medication. The medication is always valued in terms of Active Pharmaceutical Ingredients, or in other words, bulk drugs. Apart from their usage in the medical sector related to clinical practices, these drugs or hormone compounds are also utilized in the laboratories, test kits, or in some cases, in animal drugs. Being on the more expensive side, along with some special storage conditions, the taxation applied on these drugs is under observation.
To get more insights, also check out: GST rates and HSN code 1703 for Molasses
HSN Classification for Hormones and Related Compounds Harmonized System of Nomenclature (HSN) is the international standardized system of names and numbers for the classification of traded goods. Under the GST structure, rates of taxation are determined in terms of corresponding “HSN Codes”.
Relevant HSN Chapter Hormones can generally be placed in either Chapter 29 (Organic Chemicals) or Chapter 30 (Pharmaceuticals) of the HSN code.
HSN Code Heading 2937: This is a major heading under which the drugs "Hormones, prostaglandins, thromboxanes & leukotrienes, natural & those produced by synthesis; Derivatives & structural analogs thereof, including chain-modified polypeptides" are classified because these drugs function as hormones.
HSN Code 3004: This tariff category is applicable whenever these hormones are packed in the form of medicines like injections or tablets for treatment or preventive purposes in predefined or packed doses for sale at retail.
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Classification has to be accurate at the four-figure, six-figure, or eight-figure level. If it is an imported pharmaceutical agent packaged as a pure chemical, it will be classified in Chapter 29. If it is further processed to become a consumer product drug, it would then classify in Chapter 30.
GST Rates for hormones and related compounds Below is the table that provides classifications and related GST rates for hormones and related compounds based on notification releases issued from time to time.
Product Category HSN Code Applicable GST Rate Common Usage Insulin (All types) 3004 5% Used in Diabetes management Hormones & Derivatives (Bulk/API) 2937 18% Used in Raw material for drug manufacturing Oral Contraceptives 3004 12% Used in Family planning and hormonal balance Pituitary Hormones & Analogues 2937 / 3004 12% Used in Growth treatments and endocrine disorders Adrenal Cortical Hormones 3004 12% Used in Anti-inflammatory and immunosuppression Steroids & Related Compounds 2937 18% Used in Chemical research and API synthesis Thyroid Hormones & Derivatives 3004 12% Used in Hypothyroidism and metabolic regulation
Input Tax Credit on Hormonal Products Input Tax Credit is the mainstay of the entire GST system. This facility reduces taxes that have been paid in respect of inputs received while calculating the final taxes payable.
Eligibility & Compliance The following advantages of ITC can be claimed by the producers and traders of hormonal drugs:
Active Pharmaceutical Ingredients (APIs) and Excipients
Packing materials.
Capital Goods (Laboratory/Machinery used in the factory)
Input services (Logistics, Testing, and Consultancy Services
Conditions for Claiming ITC A taxpayer will be eligible for claiming ITC, and this will be achieved if the taxpayer holds a valid tax invoice, the goods/services will be received, and the supplier will have deposited funds with the government and will also be required to complete their GSTR-1 .
Importance of Proper Classification Under GST An appropriate assessment of whether the class of hormonal drugs falls under 5%, 12%, or 18% taxation rates may be extremely important in more ways than one:
1. Legal and Financial Consequences Short payment of taxes on account of incorrect classification can lead to a notice for the differential amount of taxes due along with a payment of interest (generally 18% per annum). Excess payment would lead to making the product non-competitive in the market.
2. Risks of Penalties In case a taxable business is found with the intent of wrongly valuing a taxable item with a purpose of avoiding tax payment, a fine of between 10-100 percent of tax may be charged by the tax authority.
3. The Advance R-series printers In case of ambiguity, such as in the case of a newly developed synthetic hormonal analogue, taxpayers may approach the Authority for Advance Ruling (AAR) with respect to the issue at hand.
GST Compliance for Manufacturers and Traders Keeping accounts on a rigid scale becomes all the more essential for the execution of business activities in the pharmaceutical industry under the GST regime. To get more insights, check out: GST rates and HSN code 5408 for Woven Fabrics Of Artificial Filament Yarn
Requirements of Invoice for Hormonal Products: The invoice related to hormonal products must require the HSN code (8-digit for export and large taxpayers, and 4/6 digits for others), the batch number of products, and the date of expiry.
Return Filing: The filing of GSTR-1 (outward supplies) and GSTR-3B (summary return) is mandatory. For a business associated with the pharmaceutical sector, it is imperative to reconcile GSTR-2B with the purchase register to avoid forfeiting the claim for ITCs.
Record Retention: A company has to maintain records for accounts related to production, stocks, and bills for a minimum period of 72 months, which is 6 years, calculated from the due date of the filing of the annual return for the relevant year.
Conclusion The GST structure has maintained greater efficiency and standardization in the taxation treatment of hormones and allied chemical substances in India. Though the 5% and 12% taxation rates would ensure that patients have access to necessary hormonal therapies, the rate of 18% in bulk entities is in line with the standard rate applicable to all industry chemicals.
For stakeholders dealing with the pharma industry, success lies in proper classification and GST compliance. By being aware of the latest HSN codes and notifications issued by the GST council, pharma businesses can steer clear of potential taxation risks and pay optimal taxes.
With the development of the healthcare industry through new hormonal medications, which are emerging through innovative research and developments in the health industry, soon changes might take place in taxation laws; thus, it is required to have current knowledge.
FAQ’s 1. What is the GST rate for hormonal drugs? Mostly, the hormonal drugs available in the market are liable to a rate of 12%. But in the case of “Life Saving” drugs like “Insulin,” a lower rate of 5% is applicable.
2. Does GST apply to hormonal contraceptive pills? No, most hormonal contraceptives are exempted (0% GST) in order to promote public health and family planning programs.
3. What is the GST on bulk hormones? The hormones that come under raw materials or Active Pharmaceutical Ingredients (API) will come under an 18% GST category.
4. Can I take credit for ITC on expired hormonal drugs? No, in case your hormonal drugs are damaged due to their expiration dates, then the Input Tax Credit that was taken on such drugs would need to be surrendered.
5. Why is a refund issued to hormone manufacturers? They pay 18% tax on materials but only charge 12% for the drug; so they can avail of a refund for extra tax paid.
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