2019 (8) TMI 855 - AAR - GST

Classification of goods - rate of tax - to consider Narcotic Chewable Tablet (NCT) as Nicotine Polacriliex Lozenge in their application - benefit of N/N. 01/2017-Central Tax (Rate), dated 28-06-2017 - applicant submits that their product is classifiable under chapter heading 3004 and claims the applicable rate of 12% GST in terms of entry no.63 of schedule-II of Notification 01/2017-Central Tax (Rate) dated 28-06-2017, effective from 01.07.2017. HELD THAT - Nicotine is an alkaloid present in tobacco leaves and it can also be obtained by synthesis. It is a colourless liquid, which turns brown when exposed to air, having a characteristic penetrating odour. It is a strong base, toxic, forms crystalline salts and can be used as a fungicide and insecticide for plants, as per the Explanatory Notes to the heading 29.39 at Sr. (G) of the Harmonised Commodity Description and Coding System. Further, the instant product is a chemical preparation made out from Nicotine and poly acrilix acid (carboxylic acid) having IUPAC name of Poly 1-Carboxycthelene. The said item does not fall under the Heading 3004. Accordingly it is not covered under Serial number 63 of Schedule 11 of Notification No.01 /2017-Central Tax (Rate) dated 28.06.2017 - The Chapter Notes and Explanatory Notes provide that preparation intended to assist smokers to stop smoking shall be covered by heading 21.06 or 38.24. We find that Chapter 21 deals with Miscellaneous edible preparations and heading 21.06 deals with food preparations not elsewhere specified or included. The instant product basically consists of nicotine which is not an edible / food preparation. Therefore the only alternative left for the classification of the instant product is chapter heading 38.24. Thus, the instant product, Nicotine Polacriliex Lozenge, is rightly classifiable under the heading 38.24. Accordingly the product is covered under Serial number 97 of Schedule III to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST at the rate of 18%.

Summary

Issues Involved:
1. Appropriate classification of Nicotine Polacriliex Lozenge (NPL).
2. Applicable rate of tax under Notification 01/2017-Central Tax (Rate), dated 28-06-2017.

Issue-wise Detailed Analysis:

1. Appropriate Classification of Nicotine Polacriliex Lozenge (NPL):

The applicant, a pharmaceutical company, developed a product named Nicotine Polacriliex Lozenge (NPL), used to alleviate withdrawal symptoms associated with nicotine cessation. The applicant sought an advance ruling on the classification and applicable tax rate for NPL under the CGST Act, 2017.

The applicant argued that NPL should be classified under Chapter Heading 3004, which covers "Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses." They claimed that NPL, being a medicament used for therapeutic purposes, should attract a GST rate of 12% under entry no. 63 of Schedule II of Notification 01/2017-Central Tax (Rate).

However, the Authority for Advance Ruling (AAR) examined the product's composition and usage. NPL consists of nicotine, an alkaloid present in tobacco leaves, used in measured doses to help individuals quit smoking. The AAR referred to the Explanatory Notes of the Harmonised Commodity Description and Coding System, which exclude preparations intended to assist smokers in quitting smoking from Chapter Heading 3004. Specifically, the notes exclude "Preparations, such as tablets, chewing gum, or patches (transdermal systems), intended to assist smokers to stop smoking" from this heading.

Given this exclusion, the AAR determined that NPL does not fall under Chapter Heading 3004. Instead, the AAR considered other potential classifications and concluded that the appropriate classification for NPL is under Chapter Heading 38.24, which covers "Miscellaneous chemical products."

2. Applicable Rate of Tax:

Once the classification was determined, the applicable GST rate followed suit. The AAR referred to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, which specifies the tax rates for various goods.

Since NPL was classified under Chapter Heading 38.24, the AAR found that it falls under Serial Number 97 of Schedule III of the said notification. Consequently, the applicable GST rate for NPL is 18% (9% CGST and 9% SGST).

Ruling:

The AAR ruled that the product Nicotine Polacriliex Lozenge is rightly classifiable under Chapter Heading 38.24. Accordingly, it is covered under Serial Number 97 of Schedule III to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST at the rate of 18% (9% CGST and 9% SGST).