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2020 (11) TMI 527 - AAAR - GSTClassification of goods - rate of GST - sale of Micafunign Sodium by the DTA unit of the applicant - covered under Serial No. 114 of Entry No. 180 of the Rate Notification No 01/2017 Central Tax (R) or not - GST at the rate of 5% applicable or not? - Karnataka AAR had held that sale of Micafungin sodium by the DTA unit of the applicant is not covered under Serial No. 114 of Entry No. 180 of the Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017, and therefore, is not entitled for concessional rate of GST at the rate of 5% - challenge to AAR decision - HELD THAT - A reading of entry No. 180 of Schedule Ito Rate Notification No 01/2017 IT (R) / CT (R) dated 28-06-2017, indicates that drugs and medicines falling under Chapter 30 or any other Chapter and specified in List 1 are eligible for 5% GST under the entry Sl.No 180 of Schedule I. The said entry also covers the specified drugs and medicines which are in the form of their salts and esters and diagnostic test kits. It is the case of the Appellant that the product Micafungin Sodium supplied by them is solely for the purpose of injection and hence is covered under the item No 114 of List I. The lower Authority has taken a stand that the impugned product is supplied as a bulk drug and bulk drugs are not covered under the entry SL.No 180. It is also observed from the invoice placed on record that the impugned product is classified by the Appellant under Chapter sub-heading 294190 90. We have also perused the technical write up of the product Micafungin Sodium . The terms bulk drug and drug have not been defined either in the rate notifications or in the GST laws - In this case, Micafungin Sodium is the sodium salt form of the antifungal drug Micafungin which is used in the treatment of internal fungal infections. It is the active pharmaceutical ingredient in the manufacture of the drug Mycamine which is the brand name for the antifungal injection. We find that the Central Drugs Standards Control Organisation (CDSCO), the authority which approves new drugs in India, has granted approval for the drug Micafungin Sodium for Injection of strength 50mg and 100mg, for the treatment of patients with candidemia, acute disseminated candidiasis, abscess and esophageal candidiasis, etc. The approval given is for the drug which is to be administered only as an injection.Therefore, although Micafungin Sodium is a bulk drug, its use can be only by way of injection as there is no statutory approval given for using the drug in any other form. In this case, the Micafungin Sodium supplied by the Appellant is in the form of a lyophilised powder. The term lyophilized refers to a process of freeze drying where a product becomes stable and absolutely free of moisture. The lyophilized powder gets reconstituted to its original form for injection with the addition of a suitable vehicle which in this case is Sodium Chloride. Therefore, the Micafungin Sodium supplied by the Appellant is the drug Micafungin Sodium for Injection . As already stated, the phrase for injection used in the Notification is only an indication of the form in which the drug is supplied i.e. in a dry solid form. The Customs Notification is worded in the same manner as the GST rate Notification. We therefore disagree with the findings of the lower Authority and hold that in this case, the usage of the drug is the basis on which the concession has to be given - The ruling of AAR set aside. The sale of Micafunign Sodium by the DTA unit of the Appellant is covered under Serial No. 114 of Entry No. 180 of the Rate Notification No 01/2017 IT (R) / CT (R) and therefore, is leviable to GST at the rate of 5%.
Issues Involved:
1. Applicability of concessional GST rate on Micafungin Sodium. 2. Definition and classification of "bulk drug" and "drug". 3. Interpretation of the term "Micafungin Sodium for Injection". 4. Comparison with previous tax regimes and notifications. Detailed Analysis: 1. Applicability of Concessional GST Rate on Micafungin Sodium: The primary issue is whether the sale of Micafungin Sodium by the DTA unit of the appellant qualifies for a concessional GST rate of 5% under Entry No. 180 of Schedule I of Rate Notification No. 01/2017 IT (R) / CT (R). The appellant contends that Micafungin Sodium, used for injections, should be taxed at 5%, while the lower authority ruled it does not qualify for this rate. 2. Definition and Classification of "Bulk Drug" and "Drug": The appellant argued that Micafungin Sodium is a bulk drug used for injections. The term "bulk drug" is not defined in the GST Act but is covered under the Drugs (Price Control) Order, 1995, which includes salts and esters. The appellant cited various legal precedents and regulatory definitions to support that bulk drugs are considered drugs and should be eligible for the concessional rate. 3. Interpretation of the Term "Micafungin Sodium for Injection": The appellant emphasized that Micafungin Sodium is specifically used for injections, supported by approvals from CDSCO and US FDA. They argued that the term "Micafungin Sodium for Injection" includes the bulk drug form, which is mixed with a suitable vehicle (like Sodium Chloride) to be administered as an injection. The U.S. Pharmacopeia Nomenclature Guidelines were cited to explain that "for injection" signifies a dry solid form that becomes suitable for injection upon adding a vehicle. 4. Comparison with Previous Tax Regimes and Notifications: The appellant referenced the previous Central Excise regime, where Micafungin Sodium was eligible for a concessional rate, arguing that similar provisions should apply under the GST regime. They highlighted that the Customs Notification No. 12/2012 also provided a 5% concessional rate for Micafungin Sodium for injection, indicating consistency in tax treatment across regimes. Conclusion: The appellate authority concluded that the product "Micafungin Sodium" supplied by the appellant is indeed eligible for the concessional GST rate of 5% under Entry No. 180 of Schedule I of Rate Notification No. 01/2017 IT (R) / CT (R). The ruling of the lower authority was set aside, and it was determined that the sale of Micafungin Sodium by the DTA unit of the appellant is covered under Serial No. 114 of Entry No. 180, thereby leviable to GST at the rate of 5%. The appeal filed by the appellant was disposed of on these terms.
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