On September 03, 2025, The Goods & Services Tax Council has announced the reduction in Goods and Services Tax (GST) rates for medicines. The reduced GST rates will come into effect on September 22, 2025. In this article, we have answered frequently asked questions (FAQs) about compliance associated with the reduction in GST rates for medicines (other than ayurveda and homeopathy medicines).
[If you are short on time, please read response to Q.3 and 4]
GST reduction and its impact on existing stock
1. Will the reduced GST rates apply to stock of medicines already present in the market, and if so, will the MRP of such medicines have to be reduced?
Yes. The reduced GST rates will apply to all the stock of medicines already present in the market on or after September 22, 2025, irrespective of the fact that it was manufactured, imported or packed prior to September 22, 2025.
The MRP of the medicines available in the market on or after September 22, 2025 will have to be reduced to reflect the reduction in GST rates, and the reduced MRP along with the revised GST rates applicable to medicines will have to be communicated by the manufacturers and importers of medicines to all wholesale and retail dealers. However, the MRP declared on the package of medicines need not be re-labelled or re-stickered. We have discussed this aspect in our response to Q. 5-9 below.
2. Is it possible to retain same MRP on medicines present in the market after reducing GST?
No. While it is generally permissible to increase MRP of medicines by up to 10% in India if they are not essential medicines (i.e. if they are not scheduled formulations under DPCO), doing so for stock of medicines which were manufactured or imported prior to September 22, 2025 may tantamount to denying trade and customers the benefit of reduction of GST, which is not permissible under India’s GST laws and is generally regarded as unlawful ‘profiteering’.
Compliances to be undertaken on account of reduction in GST rate
3. Which mandatory compliances should a manufacturer or importer of medicines undertake before September 22, 2025 to ensure compliance with applicable laws?
Manufacturers and importers of medicines should circulate a revised price list of medicines manufactured or imported or marketed by the company in Form V of DPCO to wholesale and retail dealers, State Drug Controllers, National Pharmaceutical Pricing Authority (NPPA) and Department of Pharmaceuticals (DoP), indicating revised GST rates and the revised MRP effective from September 22, 2025. The revised price list may be circulated through any suitable communication channel, including WhatsApp and email.
4. Which mandatory compliances should be undertaken by a manufacturer or importer of medicines on or after September 22, 2025 to ensure compliance with applicable laws?
Manufacturers and importers of medicines should undertake the following steps as soon as possible on or after September 22, 2025, in addition to declaring reduced MRP on package:
- Submit the revised price list in Form V of DPCO on the IPDMS portal of NPPA, on or before October 6, 2025.
- File Form II of DPCO to report a decrease in MRP on IPDMS Portal of NPPA, on or before October 6, 2025, applicable only if the medicine is part of list of scheduled formulations under DPCO.
Re-labelling of existing stock of medicines with revised MRP
5. Is it mandatory to declare reduced MRP on the label of medicines available with wholesale and retail dealers, which have been manufactured in India or imported into India before September 22, 2025?
No. It is not mandatory to declare reduced MRP on the label of medicines available with wholesale and retail dealers which are manufactured in India or imported into India before September 22, 2025.
However, all such medicines manufactured in India or imported into India on or after September 22, 2025 must declare reduced MRP on their label.
6. Is it mandatory to declare reduced MRP on the label of medicines stored at manufacturer’s or importer’s warehouse, which have been manufactured in India or imported into India before September 22, 2025?
No. It is not mandatory to declare reduced MRP on the label of medicines stored at manufacturer’s or importer’s warehouse, which have been manufactured in India or imported into India before September 22, 2025 provided the compliance described in response to Q. 3 have been taken.
However, if a manufacturer or importer of medicines wishes to voluntarily declare reduced MRP on the label of medicines, then the compliances described in response to Q. 7, 8 and 9 should be followed.
It is recommended that the unsold stock of medicines stored at manufacturers or importer’s warehouse should be re-labelled with reduced MRP before sale to trade, in order to reduce risk of allegation of overcharging or profiteering due to failure of retailer to sell at reduced MRP despite being notified by the manufacturer or importer about the reduction of MRP.
7. Is any permission required to re-label medicines with reduced MRP on account of reduction of GST?
Yes. While there is a prevailing understanding that all State Licensing Authorities (SLAs) in India have temporarily relaxed the requirement to obtain a manufacturing license or NOC by the manufacturers or importers for declaring reduced MRPs on medicines manufactured or imported by them before September 22, 2025, it may be pragmatic to confirm this understanding locally with the SLA of the State in which re-labelling is sought to be carried out before doing the re-labelling.
For example, in Delhi, it is mandatory for manufacturers and importers to obtain a No Objection Certificate (NOC) from the Delhi Drug Control Department prior to declaring reduced MRP on the label of medicines on account of revision of GST and no time-limit has been specified before which such re-labeling may be carried out on the label of medicines.
Please note that the re-labelling to reflect reduced MRP on account of reduction in GST is subject to conditions which are discussed in response to Q. 8 and Q.9 below.
8. If a manufacturer or importer wishes to declare revised MRP on medicines which were manufactured in India or imported into India before September 22, 2025 and whose stock is available with wholesale and retail dealers or is present in manufacturer’s or importer’s warehouse, what are the legal compliances that such manufacturer or importer should be aware of?
Assuming the manufacturer or importer has complied with the mandatory requirements outlined in response to Q. 3 and 7 above, it may lawfully declare revised MRP by re-labeling medicines which have been manufactured in India or imported into India before September 22, 2025, after fulfilling the below-mentioned conditions:
- The original MRP must remain visible, and the revised MRP must not be overwritten on it.
- Other declarations on the label should not be affected.
- The stocks should be re-called in a phased manner to avoid any shortage of the medicines in the market.
9. What are the permitted ways of declaring reduced MRP on the pack of medicines on account of reduction in GST?
Assuming the manufacturer or importer has complied with the mandatory requirements outlined in response to Q. 3, 7 and 8, the manufacturers and importers of medicines may declare reduced MRP on pack of medicines by stamping or affixing stickers or by printing.
Compliances applicable to wholesale and retail dealers
10. How are wholesale and retail dealers expected to know the revised GST rate and reduced MRP applicable to medicines stocked by them, if the stock of medicines available with them does not carry on the label a declaration of reduced MRP as of September 22, 2025?
As indicated in response to Q. 3, all manufacturers and importers of medicines are required to notify wholesale and retail dealers about revised GST rates and reduced MRP latest by September 21, 2025 by circulating a revised price list in Form V which is effective from September 22, 2025.
Accordingly, on or after September 22, 2025, all wholesale and retail dealers of the medicines must refer to the revised price list received from the manufacturer or importers of medicines before selling stock of medicines in their possession.
11. What are the compliances applicable to wholesale and retail dealers who have stock of medicines manufactured in India or imported into India prior to September 22, 2025?
On or after September 22, 2025, all wholesale and retail dealers must:
Penalties for non-compliance
12. What are the consequences of failure to circulate revised price list in Form V to wholesale and retail dealers before September 22, 2025?
The failure to circulate Form V before September 22, 2025 may result in recovery of the difference between old MRP and revised MRP from the manufacturer or importer of medicines as ‘overcharging’, along with interest and penalty, even though overcharged amount has been realized by the wholesale dealer or retail dealer.
The failure to submit Form V on the IPDMS portal on or before October 6, 2025 will constitute a violation of DPCO and may lead to penal action under the Essential Commodities Act, 1955 including fine and imprisonment.
13. What are the consequences of non-submission of Form II of DPCO before October 6, 2025?
Non-submission of Form II of DPCO is deemed to be a failure to reduce MRP of medicines by the manufacturer or importer despite reduction in GST rates. The manufacturer or importer may be held liable for overcharging consumers and be required to pay the overcharged amount, along with interest and a penalty. It may also result in criminal prosecution under the Essential Commodities Act, 1955, inviting fine and imprisonment if convicted. Form II is required to be submitted only in case of reduction of MRP of medicines which are classified as scheduled formulations under DPCO.
Requirement for obtaining a manufacturing license or NOC from State Licensing Authority for re-labelling
14. Will declaration of reduced MRP on packages of medicines be considered to be “manufacturing” and require a manufacturing license or NOC from State Licensing Authority or CDSCO?
The re-labelling of a medicine may be legally construed as manufacture of medicine under The Drugs and Cosmetics Act, 1940 (D&C Act), and such manufacturing activity requires a license from the Licensing Authority under D&C Act. The Licensing Authority in case of manufacturing of medicines in India is the respective State Licensing Authority i.e. SLA (for example – State Drug Control Department, State Food and Drug Administration). Such a license is require from SLA irrespective of whether the drug is manufactured in India or imported into India,
As indicated in response to Q. 7, the possibility and time-limit for carrying out the re-labelling of medicines with reduced MRP should be checked locally with the respective SLA in each state where the re-labelling is sought to be carried out prior to undertaking re-labelling.
Disclaimer: This article contains personal views of the authors and should not be considered as legal advice.