Understanding the Implications of GST on Dermatology Services

As of January 2026, the 56th GST Council meeting introduced significant reforms effective September 22, 2025, that restructured the tax slabs for dermatology and wellness services. The new system, often referred to as “GST 2.0,” primarily uses 5% and 18% slabs, removing the previous 12% and 28% categories for these services. In the framework of India’s Goods and Services Tax (GST), each aspect of dermatological service carries unique implications, underscoring the need for a comprehensive understanding of GST regulations within this domain.

Cosmetic vs. Medical Dermatology

The taxation depends strictly on whether the service is for a medical necessity or aesthetic enhancement.

  • Aesthetic & Cosmetic Services (Taxable):Treatments primarily for appearance—such as hair transplants, anti-aging facials, and elective plastic surgery—now attract 5% GST without Input Tax Credit (ITC), a significant drop from the previous 18%.
  • Clinical Healthcare Services (Exempt):Treatments for medical disorders (e.g., psoriasis, dermatitis, fungal infections, or reconstructive surgery after trauma) remain fully exempt (0% GST).

Dermatologists and patients also benefit from lower taxes on supplies:

  • Medical Devices: GST on diagnostic kits, surgical apparatus, and equipment (like thermometers or therapy appliances) has been reduced from 18% or 12% to 5%.
  • Medicines:Most standard medications, including many skin treatments previously taxed at 12%, now fall under the 5% GST slab.
  • Skincare Products:Common grooming essentials like hair oils and soaps are now taxed at 5%, though liquid soaps and premium cosmetics generally remain at 18%.

 

  1. Mandatory Registration Thresholds

The limit for mandatory GST registration depends on the aggregate turnover, which includes the sum of all taxable, exempt (medical), and export services under one PAN.

  • Normal Category States:Practitioners must register if their total annual turnover exceeds ₹20 lakhs.
  • Special Category States:The limit is lower at ₹10 lakhs. This primarily includes states like Mizoram, Nagaland, Tripura, and  Manipur.
  • Exception for Exclusive Exempt Services:If a dermatologist provides only exempt healthcare services (e.g., medical treatments for diseases like psoriasis or dermatitis), they are not required to register, even if their turnover exceeds the threshold.
  1. Compulsory Registration (Regardless of Turnover)

In certain scenarios, a dermatologist must register even if their turnover is below ₹20 lakhs:

  • Inter-State Services:Providing consultations or services across state lines.
  • Mixed Practice:Offering both medical (exempt) and aesthetic (taxable) services, especially if selling products like medicated shampoos or creams.
  • Online/OIDAR Services:Providing paid online workshops or digital consultancy.
  1. Composition Scheme Threshold

For small practices, the Composition Scheme offers a simplified tax structure with a fixed rate of 6% GST (3% CGST + 3% SGST):

  • Limit:Available to practitioners with an annual turnover up to ₹50 lakhs.
  • Conditions:Under this scheme, the practitioner cannot claim Input Tax Credit (ITC) and cannot collect GST separately from patients.

Sale of Medicines: The tax treatment of medicine sales depends on whether the medications are administered to inpatients or outpatients. Taxability depends significantly on how the medicine is dispensed:

  • Inpatients (Admitted):Medicines provided as part of a bundled treatment package during a hospital stay are treated as a composite supply. A composite supply is taxed according to the principal supply.
  • Outpatients (OTC/Pharmacy Sales):If a patient buys medicine directly from a clinic’s pharmacy counter without being admitted, it is a standard sale of goods and taxed at the medicine’s specific rate (usually 5% or 18%).

Composite Service: A composite supply entails a principal supply bundled with ancillary supplies that are naturally provided together. If the principal supply is exempt healthcare, the entire composite supply remains exempt. Taxability does not shift merely because one component is otherwise taxable.

The determination depends on:

Nature of service

Billing structure

Whether supplies are naturally bundled

Summary of State-Wise Thresholds (for Services)

Category  Threshold Limit States/UTs
General States ₹20 Lakhs Most of India (Maharashtra, Delhi, Karnataka, etc.)
Special Category ₹10 Lakhs Mizoram, Nagaland, Manipur, Tripura
Composition Scheme ₹50 Lakhs Nationwide (Optional for smaller practitioners)

In summary, dermatologists who offer both clinical and aesthetic services, alongside the sale of medications, are confronted with the critical task of carefully assessing their revenue thresholds to ascertain their GST registration obligations.

For any queries

Feel free to write to info@taxreturnwala.com