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2021 (4) TMI 931 - AAR - GSTLevy of IGST - import as well as supply of Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS) - taxable at the rate of 12% or Entry No.453 to Schedule III attracting a levy of Integrated Tax at the rate of 18%? - Entry No. 80 in Schedule II to the Notification No. 1/2017-Integrated Tax (Rate) dated 28-06-2017 (as amended) - HELD THAT - The facts of the case are identical to the ruling passed by this authority in the case of IN RE M/S. CHROCHEMIE LABORATORY PVT. LTD., 2019 (10) TMI 871 - AUTHORITY FOR ADVANCE RULING, KARNATAKA , wherein it was ruled that Entry. No. 80 of Schedule II to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to prepared laboratory reagents - The Karnataka Appellate Authority of Advance Ruling, while disposing the appeal filed by M/s. Chromachemie Laboratory Pvt. Ltd., has set aside the aforesaid ruling in IN RE M/S. CHROMACHEMIE LABORATORY PRIVATE LIMITED 2020 (1) TMI 795 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA . The Pharmaceutical Reference Standards (Prepared Laboratory Reagents) imported and supplied by the Appellant and classified under Tariff Item 3822 00 90 of the Customs Tariff Act, 1975 is covered under Entry No. 80 of Schedule-II to Notification No. 1/2017-Integrated Tax (Rate) dated 28th June, 2017 attracting a levy of Integrated Tax at the rate of 12%.
Issues Involved:
1. Applicability of Entry No. 80 in Schedule II to Notification No. 1/2017-Integrated Tax (Rate) dated 28-06-2017 for import and supply of "Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)". 2. Determination of the appropriate Integrated Tax rate for PRS - 12% under Entry No. 80 or 18% under Entry No. 453 to Schedule III. Issue-Wise Detailed Analysis: 1. Applicability of Entry No. 80 in Schedule II to Notification No. 1/2017-Integrated Tax (Rate) dated 28-06-2017: The applicant, a private limited company registered under the GST Act, sought an advance ruling on whether Entry No. 80 in Schedule II to Notification No. 1/2017-Integrated Tax (Rate) dated 28-06-2017 applies to the import and supply of "Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)" attracting a 12% Integrated Tax rate. The applicant argued that PRS, classified under Tariff Item 3822 00 90 of the Customs Tariff Act, is a "Prepared Laboratory Reagent" and should fall under Entry No. 80, which covers "All diagnostic kits and reagents" under Chapter Heading 3822. The applicant provided a detailed explanation of the classification under Chapter 38 of the Customs Tariff Act, 1975, which includes "Miscellaneous chemical products" and specifically "Diagnostic or laboratory reagents on a backing, prepared diagnostic or laboratory reagents whether or not on a backing, other than those of heading 3002 or 3006; certified reference materials." The applicant emphasized that PRS is a "prepared laboratory reagent without a backing" intended for analytical calibrating and referencing purposes, not for detection or diagnosis. The applicant cited the Harmonised System of Nomenclature (HSN) Explanatory Notes and previous rulings, including the Hon'ble CESTAT Bangalore's decision in LGC Promochem India Pvt. Ltd. v. Commissioner of Customs & Service Tax, Bangalore, which classified PRS under Chapter Heading 3822. This decision was upheld by the Hon'ble Supreme Court of India. 2. Determination of the Appropriate Integrated Tax Rate for PRS: The applicant argued that the only relevant entry in the Rate Notification for goods under Chapter Heading 3822 is Entry No. 80 of Schedule II, which provides for a 12% GST rate. They contended that PRS should not be classified under Entry No. 453 of Schedule III, which applies a higher 18% tax rate to goods not specified in Schedules I, II, IV, V, or VI. The applicant's interpretation of the law emphasized that the term "reagent" in Entry No. 80 is broad enough to include both diagnostic reagents and prepared laboratory reagents. They argued that the absence of specific exclusions or qualifications in the entry means it should cover all reagents, including PRS. The applicant supported this interpretation with various legal precedents and judgments, including the Hon'ble Supreme Court's decision in Commissioner of Commercial Tax, U.P. v. A.R. Thermosets (Pvt.) Ltd. The applicant also referred to a Circular issued by the Central Board of Indirect Taxes and Customs, which aimed to reduce tax liabilities under the GST regime compared to the previous indirect tax rates. They argued that the combined rate of indirect taxes on PRS in the pre-GST regime was approximately 18% for intra-state sales and 14.5% for inter-state sales, indicating the intention to lower the tax incidence to 12% under GST. Findings and Discussion: The authority noted that the facts of the case were identical to a previous ruling in the case of M/s. Chromachemie Laboratory Pvt. Ltd., where it was ruled that Entry No. 80 of Schedule II did not apply to prepared laboratory reagents. However, this ruling was set aside by the Karnataka Appellate Authority of Advance Ruling, which clarified that Entry No. 80 covers all diagnostic and laboratory reagents under Chapter Heading 3822. The appellate authority emphasized that the legislative intent was to reduce the GST rate on all reagents, as recommended by the Fitment Committee. Ruling: The authority concluded that the Pharmaceutical Reference Standards (Prepared Laboratory Reagents) imported and supplied by the applicant, classified under Tariff Item 3822 00 90 of the Customs Tariff Act, 1975, are covered under Entry No. 80 of Schedule II to Notification No. 1/2017-Integrated Tax (Rate) dated 28th June, 2017, attracting a 12% Integrated Tax rate.
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