2018 (6) TMI 460 - AAR - GST

Pharma Company Wins GST Rate Challenge, Secures 5% Tax Levy for Specific Drug Products Under Precise Classification Rules

Pharmaceutical manufacturer sought advance ruling on GST rates for specific drug products. HC determined that specific entries in tax schedule override ... Classification of goods under rate schedule - Eligibility for 5% GST on specified drugs - Specific entry overrides general entry - Interpretation of tariff entriesClassification of goods under rate schedule - Eligibility for 5% GST on specified drugs - Specific entry overrides general entry - Whether the applicant's products EFAVIRENZ, EMTRICITABINE, SUNTINIB MALATE, RALTEGRAVIR POTASSIUM and LATANOPROST are eligible for the 5% GST rate under Sl. No. 180 of Schedule I read with List 1, notwithstanding their potential classification under the general entry for organic chemicals attracting 18% in Schedule III. - HELD THAT: - The Authority examined the relevant entries: Sl. No. 180 of Schedule I (5%) which specifically lists the applicant's products in List 1, and Sl. No. 40 of Schedule III (18%) which is a general entry for organic chemicals. The products manufactured by the applicant are expressly specified in List 1 appended to Sl. No. 180 and thereby fall squarely within the specific entry attracting 5%. Applying the settled principle that a specific entry overrides a general entry, the Authority held that the specific listing in List 1 governs classification and tax rate. Consequently, the entries in the general tariff cannot be read down to displace the specific rate prescribed against Sl. No. 180 for the listed drugs. [Paras 4, 5]The applicant's listed products are taxable at 5% under Sl. No. 180 of Schedule I as specified in List 1; the specific entry displaces the general 18% entry.Final Conclusion: Advance ruling granted: the specified drugs manufactured by the applicant are eligible for the 5% GST rate under Sl. No. 180 of Schedule I read with the appended List 1; the specific tariff entry prevails over the general entry in Schedule III. Issues:- Determination of the rate of tax on pharmaceutical products manufactured by the applicant.- Eligibility to claim the benefit of a lower GST rate under specific entries in the tax schedule.Analysis:- The applicant, engaged in manufacturing pharmaceutical products, sought an advance ruling on the rate of tax for products such as EFAVIRENZ, EMTRICITABINE, SUNTINIB MALATE, RALTEGRAVIR POTASIUM, and LATANOPROST under specific entries in the tax schedule.- The applicant contended that since the products fell under List 1 of SI. No. 180 of Schedule I, they should benefit from the lower GST rate of 5% as per Notification No. 01/2017-Central Tax(Rate).- The Authority reviewed the relevant entries in Schedule I and Schedule III of the tax notification. It was observed that the products manufactured by the applicant were covered under List 1 of SI. No. 180 of Schedule I, which specified a 5% tax rate for drugs or medicines.- The Authority noted that specific entries override general entries in tax schedules. Therefore, since the applicant's products were covered by specific entries, they were entitled to the lower tax rate specified against those specific entries.- Consequently, the ruling was passed in favor of the applicant, confirming their eligibility to claim the benefit of the lower GST rate of 5% for the mentioned pharmaceutical products under the relevant tax schedule entries.This judgment clarifies the eligibility of a pharmaceutical manufacturer to avail a lower GST rate for specific products based on the entries in the tax schedule. It emphasizes the importance of specific entries overriding general entries in determining the applicable tax rate for goods.