In re Cipla Limited (CAAR Mumbai)
The applicant filed applications before the Customs Authority for Advance Ruling (CAAR), Mumbai, seeking clarification on whether Integrated Goods and Services Tax (IGST) at 5% is applicable on the import of bulk drugs (Active Pharmaceutical Ingredients—APIs) under Sl. No. 226 of Schedule I of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17.09.2025.
The applicant is a pharmaceutical company engaged in manufacturing and supplying pharmaceutical products. It imports bulk drugs, which are APIs used in the manufacture of formulations and, in certain cases, for testing, clinical trials, bioavailability, and bioequivalence studies. These imports are undertaken under licenses issued under the Drugs and Cosmetics Act, 1940 and the New Drugs and Clinical Trials Rules, 2019.
The applicant submitted that bulk drugs are classifiable under Chapters 28 or 29 of the Customs Tariff but qualify as “drugs” for the purpose of IGST rate notification. It relied on Sl. No. 226 of Schedule I of Notification No. 9/2025, which prescribes IGST at 5% for “all drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs,” excluding those covered under the NIL-rated entry in Sl. No. 113 of Notification No. 10/2025.
The applicant contended that bulk drugs satisfy the conditions for applicability of 5% IGST: (i) they fall under “any Chapter,” (ii) they qualify as “drugs or medicines,” and (iii) they are not covered under the NIL-rated category. It argued that bulk drugs, being APIs, are substances used as components of drugs and are treated as drugs under the Drugs and Cosmetics Act, 1940. Further, it submitted that the term “drugs” should be interpreted broadly to include bulk drugs, supported by definitions under the Drugs (Price Control) Order, 2013 and judicial precedents.
