In re M/s Kaustubha Scientific Research Laboratory Private Ltd. (GST AAR Karnataka)
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%.
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
M/s Kaustubha Scientific Research Laboratory Private Ltd., (herein after referred to as ‘the applicant’), #142, 3rd Floor, 5th Cross, RMV Extension, Bengaluru (Urban), Karnataka- 560080 having GSTIN number- 29AABCP0825A1ZX have filed an application for Advance Ruling under Section 97 of CGST Act, 2017, read with Rule 104 of the CGST Rules and Section 97 of the KGST Act, 2017 read with Rule 104 of 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 registered person under the provisions of the Central Goods and Services Tax Act, 2017 as well as the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act” and the “KGST Act/SGST Act” respectively) engaged in the distribution of Pharmaceutical Reference Standards from Pharmacopoeias like European Pharmacopoeia (EP), British Pharmacopeia (BP), Indian Pharmacopeia (IP), Japanese Pharmacopoeia (JP). The applicant is seeking advance ruling on the applicability of entry in Notification No. 01/2017-IT (R) for their product prepared laboratory reagents/ Pharmaceutical Reference Standards.
3. The applicant has sought advance ruling in respect of the following question:-
Whether the applicable entry for prepared laboratory reagents/ Pharmaceutical Reference Standards in the Notification No. 01/2017-IT (R) is Sr. No. 80 of Schedule II, attracting a levy of 12% or Sr. No. 453 of Schedule III attracting a levy of 18 %?
4. Admissibility of the application: The question is about “applicability of a notification issued under the provisions of this Act” and hence is admissible under Section 97(2)(b) of the CGST Act 2017.
5. The applicant furnishes some facts relevant to the issue:
5.1 . The applicant plans to import and supply Prepared Laboratory Reagents/PRS. The applicant is a science-based organization 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. They intend to import Pharmaceutical Reference Standards (hereinafter also referred to as ‘PRS’) from various official pharmacopoeias like US Pharmacopoeia (USP), European Pharmacopeia (EDQM), British Pharmacopoeia (BP) or any other suitable pharmacopoeia and to further supply them to pharmaceutical companies in India.
5.2 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. PRS is a reference analytical sample provided by the official global 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. PRS is classifiable as ‘Prepared Laboratory Reagent’ and is covered under Tariff Entry 3822 00 90 of the Customs Tariff Act. This classification is supported by the decision of Honlile CESTAT, Bangalore in the matter which is reported as LGC Promochem India Pvt. Ltd. v. Commissioner of Customs & Service Tax, Bangalore [2016 (340) E.L.T. 406 (Tri. – Bang.)]. This decision has been upheld by Hon’ble Supreme Court of India and reported in 2018 (360) E.L.T. A173 (S.C.).
5.3 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. In the facts of the present case, the issue under consideration 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 in terms of the Rate Notification No. 01/2017-CT (R) dated 28.06.2017.
5.4 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:
Schedule-II -12%
