In re Strides Emerging Markets Ltd (GST AAAR Karnataka)
The active ingredient in ‘Nicotine Polacrilex Lozenge’ is Nicotine which is a natural alkaloid. Nicotine is bound to an ion-exchange resin (polymethacrilic acid) and administered in the form of tablets, chewing gum, lozenge or patches The chemical formulation of the nicotine bound to the resin polacrilexis such that it provides the user of the product blood nicotine levels via buccal absorption that will approximate those produced by the inhalation of tobacco smoke. We find that the Nicotine Polacrilex Lozenge is a chemical preparation and hence is more aptly classifiable under Chapter Heading 38.24 of the Customs Tariff Act, 1975.
In the GST rate Notification No 01/2017-Central Tax (Rate) dated 28.06.2017, the “Prepared hinders for foundry’ moulds or cores; Chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included” falling under Chapter Heading 38.24 are covered under entry SI.No 97 of Schedule III with a GST rate of 18% (CGST 9% plus SGST 9%).
FULL TEXT OF THE APPELLATE AUTHORITY FOR ADVANCE RULING ,KARNATAKA
At the outset, we would like to make it clear that the provisions of both the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017 and KGST Act, 2017) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the corresponding similar provisions under the KGST Act.
The present appeal has been filed under Section 100 of the CGST Act, 2017 and the KGST Act, 2017 by M/s Strides Emerging Markets Ltd (hereinafter referred to as ‘Appellant’) against the Advance Ruling No KAR ADRG 18/2019 dated 07.08 2019 pronounced by the Karnataka Authority for Advance Ruling.
Brief facts of the case:
1. The Appellant is a pharmaceutical company engaged in the development and manufacture of generic and IP led niche pharmaceutical products. The Appellant is registered as a 100% Export Oriented Unit (EOU) in Karnataka.
2. The Appellant has developed a new product “Nicotine Polacrilex Lozenge” (NPL) which is purportedly used for therapeutic purpose tor nicotine consumption cessation The product is available in dosages of 2 mg and 4 mg depending on the power of the medicine and the manner of intake of NPL is mentioned on the usage manual which is kept inside the NPL packets.
3. The primary ingredient in NPL is nicotine which is mixed with various other ingredients to add colour, flavor, etc and the target customer base of NPL is addicted smokers who wish to give up or reduce the smoking habit When a person uses tobacco products, there are various harmful chemicals which go inside the human body in addition to nicotine which cause life threatening diseases.
4. The primary effect of nicotine in tobacco products is its stimulant effect which acts as a contributing factor to the addictive properties of tobacco smoking In other words, the presence of nicotine in tobacco contributes towards addiction of a particular person to smoke tobacco However, in NPL, the primary ingredient nicotine is present in a non-harmful quantity. NPL when taken in prescribed quantum, provides the body with adequate nicotine intake However, there is gradual decline in the dependency of the body on nicotine Given this, the harmful effects of smoking tobacco are nullified by taking NPL.
5. The following entries in the GST rate Notification No 01/2017 CT(R) /IT (R) dated 28.06.2017 prompted the Appellant to seek a ruling before the Karnataka Authority for Advance Ruling:
