In this modern growing world, human beings are suffering from various kinds of disease due to their lifestyle and habits. In today’s world, medicine is the first aid preferred for every disease. The usage of medicine is increase day by day.
The current article helps to understand the GST provisions as applicable on medicine like GST rates, GST provisions affecting clearance of physician sample and procedure for returning the expired medicine.
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GST RATES ON MEDICINE
As popularly known, GST rates are divided into 4 slabs i.e. 5%, 12%, 18% and 28%. Chapter 30 covers all the pharmaceutical products and following are the medicines chargeable to NIL GST rates –
| HSN CODE | DESCRIPTION | GST RATES |
| 3002 | Human blood and its components | NIL |
| 3006 | All types of contraceptives | NIL |
However, most of the other medicines are covered within 5% or 12% GST slab rates.
CLEARANCE OF THE PHYSICIAN SAMPLES –
Under the pharmaceutical industry it is common practice that they need to clear the physician sample for free of cost distribution. Now since the value of supply of the physician sample is zero, since the same are distributed free of cost, there is no requirement of payment of GST on the same. However, the Input Tax Credit (ITC) availed on the said sample, which is cleared at zero value, needs to be reversed.
PROCEDURE FOR RETURNING THE EXPIRED MEDICINE –
Vide circular no. CBEC/20/16/04/2017-GST dated 26th October, 2018, the government has laid down the entire procedure to be followed for returning of the expired medicines.
In the Pharmaceutical industry, the goods which have crossed their date of expiry are colloquially referred as ‘time expired goods’ i.e. expired medicine and the same are returned back by the retailer to the wholesaler and finally from the wholesaler to the manufacturer.
The retailer or the wholesaler, returning the time expired goods, can follow either of the below mentioned two procedure –
PROCEDURE 1 – RETURNS TO BE TREATED AS FRESH SUPPLY –
The below mentioned table helps to understand the procedure, easily –
| TIME EXPIRED GOODS RETURNED BY | MODE OF DOCUMENT THROUGH WHICH GOODS ARE RETURNED | ITC |
| Registered person | Tax invoice | Recipient of the return supply will able to avail ITC of the same subject to the fulfillment of the conditions specified in section 16 of the CGST Act. |
| Composition tax payer | Bill of supply | ITC is not available to the recipient of the return supply |
| Unregistered person | Commercial document | There is no question of ITC at all. |
It has been specifically clarified by the board, in the above referred circular, that if manufacturer destroys the time expired goods, then, he is required to reverse the input tax credit availed on the return supply and not the input tax credit that is attributable to the manufacture of such time expired goods.
PROCEDURE 2 – RETURN THROUGH ISSUANCE OF CREDIT NOTE –
The person returning the time expired goods (wholesaler or retailer) has an option to issue credit note as per provisions of section 34 (1) of the Central Goods and Service Tax Act, 2017 to the wholesaler or the manufacturer, as the case may be.
In gst only a supplier can issue debit/credit note.
Therefore a retailer cannot issue debit note as it has received supply from supplier.
Instead of what you mention in your article the credit note shall be issued by wholesalers/manufacturer.