No need to relabel existing medicine stock: FinMin on new GST rates

Recalling or re-labelling medicines already in the supply chain before September 22 will not be mandatory, the Finance Ministry said on Tuesday, issuing a fresh set of frequently asked questions (FAQs) to address industry concerns following the announcement of goods and services tax (GST) revisions.

“Recalling, re-labelling, or re-stickering on the label of container or pack of stocks released in the market prior to September 22, 2025, is not mandatory, if manufacturer/marketing companies are able to ensure price compliance at the retailer level,” the FAQs stated.

According to Rahul Shekhar, partner in indirect tax at Nangia Andersen LLP, while the ministry has clarified that medicines need not be recalled or re-labelled to reflect the revised GST rates, the issue remains unresolved for other sectors such as fast-moving consumer goods (FMCG) and retail. “The government should come out with a clarification for other sectors as well as clarifying how reduced prices can be passed on to the end customer on the stock already with retailers, dealers without changing the MRP on the products,” Shekhar said.

The FAQs also noted that the GST Council’s decision to rationalise rates on unmanned aircraft will bring all categories of drones under a uniform 5 per cent tax. Previously, drones for personal use attracted 28 per cent GST, those fitted with digital or video camera recorders 18 per cent, and others 5 per cent. “The FAQs do not clarify how past dispute cases related to drones will be settled, or whether the high-pitched demands raised earlier by the tax department will be withdrawn,” said Vivek Jalan, partner at Tax Connect Advisory

The National Pharmaceutical Pricing Authority (NPPA) clarified that manufacturers and marketing companies must instead issue revised price lists reflecting updated GST rates and maximum retail prices (MRP) to dealers, retailers and state regulators, ensuring compliance at the consumer level.

On hotels, the ministry clarified that accommodation priced up to ₹7,500 per unit per day will be taxed at 5 per cent without input tax credit (ITC). Such hotels will not have the option to pay 18 per cent with ITC on these rooms, and correspondingly, ITC will not be available on them.

In the insurance sector, individual health and life insurance services have been exempted under GST. The ministry further clarified that reinsurance services will also be exempted. However, insurers will need to reverse ITC availed on other input services such as commissions and brokerage, since the output supply itself is exempt. “At present, insurers are availing ITC on many inputs and input services such as commissions, brokerage and reinsurance, etc. Out of these input services, reinsurance services will be exempted. ITC of other input services to be reversed because the output services will be exempted,” the ministry stated.

On delivery services, the ministry clarified that local delivery provided through e-commerce operators (ECOs) will attract 18 per cent GST. Where such services are supplied by unregistered persons through an ECO, the tax liability will shift to the operator under Section 9(5) of the CGST Act. However, if the services are supplied by a registered person -- either directly or via an ECO -- the liability to pay GST at 18 per cent will rest with the supplier. The FAQs further noted that local delivery through ECOs will not fall under the definition of goods transport agency (GTA) services. A GTA is a transporter that moves goods by road and issues a consignment note, which makes it liable for GST under specific rules.