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2021 (1) TMI 372 - AAR - GSTClassification of goods - Bulk Drugs - whether the bulk drugs are eligible of GST rate @5% in terms of Sr. No. 180 of Schedule I of Notification No.01/2017 (Rate) dated 28.06.2017, as amended? - HELD THAT - 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. The term bulk drugs is not defined in CGST, Act 2017. Therefore, DRUGS (PRICES CONTROL) ORDER, 1979 is ordered - From the plain reading of said definition, it is crystal 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. Thus, 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. Danuorubicin, Epirubicin, Idarubicin and Zoledronin Acid 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 Danuorubicin, Epirubicin, Idarubicin and Zoledronin Acid, 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.
Issues Involved:
1. Eligibility for lower GST rate of 5% for bulk drugs under Sr. No. 180 of Schedule I of Notification No. 01/2017-CT (Rate) dated 28.06.2017. Issue-wise Detailed Analysis: 1. Eligibility for Lower GST Rate of 5%: The applicant, a manufacturer of bulk drugs (Daunorubicin, Epirubicin, Idarubicin, and Zoledronic Acid), sought an advance ruling on whether these drugs are eligible 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 applicant argued that these drugs should be classified under the specific entry of Sr. No. 180, which pertains to "Drugs or medicines including their salts and esters and diagnostic test kits specified in List I appended to this Schedule." The applicant's interpretation was that the term "Drugs" should be broadly construed to include bulk drugs, as these are essential ingredients in the manufacture of life-saving medicines. They cited the precedent set by the Andhra Pradesh Authority for Advance Ruling, which allowed a lower GST rate for similar bulk drugs. Discussion and Findings: The Authority for Advance Ruling (AAR) examined the relevant provisions of the CGST Act, 2017, and the GGST Act, 2017, noting that both acts are substantially similar. The key issue was whether bulk drugs qualify for the concessional GST rate of 5% under Sr. No. 180 of Schedule I of Notification No. 01/2017-CT (Rate) dated 28.06.2017. The AAR referred to the definition of "drugs" under the Drugs and Cosmetics Act, 1940, which includes "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 beings or animals." The AAR also considered various judicial interpretations emphasizing that statutory words should be construed according to their plain, ordinary, and popular sense unless context suggests otherwise. The AAR observed that the term "bulk drugs" is not defined in the CGST Act, 2017, but referred to the definition in the Drugs (Prices Control) Order, 1979, which describes bulk drugs as active pharmaceutical ingredients used as ingredients in formulations. The AAR concluded that bulk drugs are raw materials and not ready for direct administration to humans. Therefore, they do not qualify as "drugs or medicines" eligible for the concessional GST rate of 5%. Ruling: The AAR ruled that the applicant is not eligible to claim the benefit of the lower GST rate of 5% under Sr. No. 180 of Schedule I of Notification No. 01/2017-CT (Rate) dated 28.06.2017, as bulk drugs are not included in the specified entry. The ruling was negative, confirming that the applicable GST rate for the bulk drugs in question remains at 18%.
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