In re M/ s Chromachemie Laboratory Private Limited (GST AAR Karnataka)
The Prepared Laboratory Reagents or Pharmaceutical Reference standards (HSN 3822 00 90) which are not diagnostic reagents are not covered under Entry No.80 of Schedule II of Notification No.1/2017 – Integrated Tax (Rate) dated 28.06.2017 and is covered under entry no.453 of Schedule III of Notification No.1/2017 -Integrated Tax (Rate) dated 28.06.2017 and attracts IGST at 18%.
Read AAAR- 12% IGST payable on import of Pharmaceutical Reference Standards
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
1. M/ s Chromachemie Laboratory Private Limited, (called ‘applicant’ hereinafter), having GSTIN number 29AAFCCO285K1ZF, have filed an application anftw dvance Ruling under Section 97 of CGST Act, 2017 8r, KGST Act 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017, in FORM GST ARA-01, discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The Applicant is a private limited company and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the following question:
Whether Entry No. 80 in Schedule II to the Notification No.1/2017- Integrated Tax (Rate) dated 28.06.2017 (as amended) is applicable for import as well as supply of “Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)” attracting a levy of Integrated Tax at the rate of 12% or Entry No.453 to Schedule III attracting a levy of Integrated Tax at the rate of 18%?
3. The applicant furnishes some facts relevant to the stated activity:
a. The applicant states that they are a science based organisation conceptualized to cater to the growing analytical and regulatory requirement of the Pharmaceutical Industries and to provide solutions to the new challenges in separations and purifications faced in the Pharmaceutical and Research Institutions worldwide, With the State of the Art Research and Development Centre established at Bangalore, the applicant is a leading organisation engaged in new product development for addressing the growing challenges in the analysis and separation of pharmaceutical, biopharmaceutical and food industries.
b. The applicant inter-alia imports Pharmaceutical Reference Standards (hereinafter also referred to as “PRS”) from various official pharmacopeias like US Pharmacopoeia (USP), European Pharmacopoeia (EDQM), British Pharmacopoeia (BP) and supplies them to all major pharmaceutical companies in India like Sun Pharmaceuticals Ltd., Torrent Pharmaceuticals , Lupin Ltd., Matrix Laboratories Ltd., Ranbaxy Ltd., Dr.Reddy’s, Aurobindo Pharmaceuticals Ltd., etc.
c. PRS is in the nature of Prepared Laboratory Reagent and is a substance of known purity which is intended to be used exclusively for a specified analytical calibrating and referencing purposes. PRS is not used for detection or diagnosis and is not to be used as a drug as clearly stated on the label or accompanying certificate or literature.
d. PRS is a reference analytical sample provided by the official pharmacopoeias required to be used by the pharmaceutical manufacturers to confirm their product quality standards in conformity with the respective monographs prescribed. These official reference standards are global in nature and are required to be used by drug manufacturers to ensure that the quality of the medicines produced by them are in conformity with the respective monographs prescribed by these official pharmacopoeias. The drug manufacturing companies use these PRS in their laboratory tests on all drug substances for determining the purity of medicine and identification and quantification of pharmaceutical impurities.
e. The applicant states that presently, at the time of import, the applicant is classifying PRS as “Prepared laboratory Reagent” and have classified the same under Tariff Entry 3822 00 90 of the Customs Tariff Act, in line with the decision of the Hon’ble CESTAT, Bangalore in the matter which is reported in LGC Promochem India Pvt. Ltd. v. Commissioner of Customs and Service Tax, Bangalore [2016(340) ELT 406 (Tri.-Bang)]. This decision is upheld by the Hon’ble Supreme Court of India and reported in 2018(360) ELT A173 (SC).
f. The applicant submits that the classification of PRS under Tariff item 3822 00 90 is undisputed and the present application has not been filed for clarification with regard to the classification of PRS.
g. As mentioned supra, the applicant imports PRS classifying it under Tariff item 3822 00 90 of the Customs Tariff Act from various official pharmacopoeias and supplies it to major pharmaceutical companies in India while adopting the classification under the same Tariff Item 3822 00 90.
h. In the facts of the present case, the issue under consideration, according to the applicant, is the applicability of rate of tax on import and supply of the Prepared Laboratory Reagent classifiable under Tariff Item 3822 00 90, in terms of the Rate Notification.
i. The applicant submits that the only entry in the Rate Notification which covers the goods falling under Chapter Heading 3822 being “Diagnostic Kits and Reagents” is Entry No.80 of Schedule II, which provides for the rate of GST at 12%. The relevant entry reads as follows:
