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2021 (1) TMI 564 - AAR - GSTClassification of goods - pharmaceutical products - Bulk Drugs and intermediates - Alpha-Ketoanalogue Isoleucine Calcium Salt - Alpha-Ketoanalogue Valine Calcium Salt - Alpha-Ketoanalogue Leucine Calcium Salt - Alpha-Ketoanalogue Methionine Calcium Salt - Alpha-Ketoanalogue phenylalanine Calcium Salt - classified under HSN code 2919 or not? - applicant submitted that as per Notification No. 01/2017-Ct (Rate) dated 28.06.2017 their products is liable to GST @ 5% in respect of goods specified in Schedule-I under Sr. No. 180 under Ch. 30 and under Schedule-1 List -1 Sr. No. 54 as such their product name is Ketoanalogue preparation of essential amino acids - HELD THAT - As per Sr. No. 180 of Schedule-I of Notification No. 01/2017-CT (Rate) dated 28.06.2017, Drugs or medicines including their salts and esters specified in List I appended to this Schedule are eligible for GST @5%. In CGST Act 2017, the terms Medicine or Drugs have not been defined. We consider the definition Drugs given in Drugs and Cosmetics Act, 1940 (Central Act 23 of 1940). Clause (i) of Section 3(b) defines a drug as all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human being, or animals , including specified preparations. Thus, Sr. No. 180 of Schedule-I of Not. No. 01/2017-Ct (Rate) dated 28.06.2017, as amended, only such medicine and drugs are covered, which can be used for or in diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings - further, the term 'drugs' as per DRUGS (PRICES CONTROL) ORDER, 1979 makes it clear that bulk drugs are raw material /ingredient of pharmaceutical and they are the Active Pharmaceutical Ingredients (i.e. API) of the medicine. In other words, it is the substance responsible for the product being a medicine. The bulk drug would inevitably remain the same as it is the identity of the medicine. When the bulk drug is absent, the product is no longer a medicine and when it is changed, it is a new medicine. Bulk dugs is not defined in GST, therefore, in common parlance we can say that Bulk drugs is basically an Active Pharmaceutical Ingredients (API) meaning any pharmaceutical, chemical, biological or plant product, which is used as such or as an ingredient in any formulation. It is an admitted fact that the product being supplied by the applicant cannot be directly administered in a human being. The concessional rate of GST is applicable only to the medicine or drugs, which are ready for administering in the human being or person - In the instant case, the applicant supplies bulk drug to their customers and hence the said bulk drug becomes raw material to the said customers. The applicant contention is that their bulk drug i.e. Alpha-Ketoanalogue Isoleucine Calcium Salt, Alpha-Ketoanalogue Valine Calcium Salt, Alpha-Ketoanalogue Leucine Calcium Salt, Alpha-Ketoanalogue Methionine Calcium Salt, Alpha-Ketoanalogue phenylalanine Calcium Salt is covered under the entry No. 180 of Not. No. 01/2017-CT (Rate) dated 28.06.2017 and eligible for concessional rate of GST. In the said entry No. 180 of said Notification word Bulk Drugs would have been included, had the intention of the Government been to extend the benefit of concessional rate to the bulk drugs/raw material. Therefore 5% GST is not applicable to the bulk drug Alpha-Ketoanalogue Isoleucine Calcium Salt, Alpha-Ketoanalogue Valine Calcium Salt, Alpha-Ketoanalogue Leucine Calcium Salt, Alpha-Ketoanalogue Methionine Calcium Salt, Alpha-Ketoanalogue phenylalanine Calcium Salt, in terms of List I to Entry No. 180 of Schedule I to the Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017. In view of the entry No. 40 of Notification No. 01/2017-Ct (Rate) dated 28.06.2017 the goods viz. bulk drugs and intermediate i.e. Alpha-Ketoanalogue Isoleucine Calcium Salt, Alpha-Ketoanalogue Valine Calcium Salt, Alpha-Ketoanalogue Leucine Calcium Salt, Alpha-Ketoanalogue Methionine Calcium Salt, Alpha-Ketoanalogue phenylalanine Calcium Salt classifiable under HSN 2919 attract GST @ 18%.
Issues Involved
1. Classification of goods. 2. Determination of tax liability under HSN 2919. Detailed Analysis Classification of Goods The applicant, M/s. Altis Finechem Pvt. Ltd., engaged in the manufacture and supply of bulk drugs and intermediates, sought an Advance Ruling to classify their products under HSN 2919. These products include Alpha-Ketoanalogue Isoleucine Calcium Salt, Alpha-Ketoanalogue Valine Calcium Salt, Alpha-Ketoanalogue Leucine Calcium Salt, Alpha-Ketoanalogue Methionine Calcium Salt, and Alpha-Ketoanalogue phenylalanine Calcium Salt. The applicant contended that their products should be classified under CTH No. 30 and liable to a 5% GST rate as per Sr. No. 180 of Notification No. 01/2017-CT (Rate) dated 28.06.2017. They argued that their products are "Ketoanalogue preparation of essential amino acids" and should be considered as drugs or medicines. Determination of Tax Liability The core issue was to determine whether the applicant's products qualify for a lower GST rate of 5% under Sr. No. 180 of Schedule-I of Notification No. 01/2017-CT (Rate) dated 28.06.2017. The relevant entry specifies that "Drugs or medicines including their salts and esters and diagnostic test kit" are eligible for the 5% GST rate. The term "drug" as defined by the Drugs and Cosmetics Act, 1940, includes all substances intended for diagnosis, treatment, mitigation, or prevention of diseases in humans or animals. However, the term "bulk drugs" is not defined in the CGST Act, 2017. According to the Drugs (Prices Control) Order, 1979, "bulk drug" refers to any pharmaceutical, chemical, biological, or plant product used as an ingredient in formulations. The Authority concluded that the applicant's products, being bulk drugs, are raw materials or Active Pharmaceutical Ingredients (API) and cannot be directly administered to humans. Therefore, they do not qualify for the concessional 5% GST rate, which applies only to ready-to-administer drugs or medicines. Ruling The Authority ruled that the products in question are classifiable under HSN 2919 and are liable to GST at the rate of 18% (9% CGST + 9% SGST) as per Notification No. 01/2017-CT (Rate) dated 28.06.2017. The ruling emphasized that the concessional rate of 5% GST is not applicable to bulk drugs, which are considered raw materials and not finished medicinal products. Additional Considerations The Authority also referenced a previous ruling in the case of M/s. LAURUS LABS LTD, where certain bulk drugs were classified under List 1 and taxed at 5% GST. However, it was clarified that this ruling is not applicable to the applicant's case as the products are different, and Advance Rulings are binding only on the applicant who sought it and the concerned officer. In summary, the products manufactured by the applicant are classified under HSN 2919 and attract an 18% GST rate, as they are bulk drugs and not finished medicinal products eligible for the concessional rate.
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