Classification of Nicotine Polacriliex Lozenge (NPL) under GST

The Authority for Advance Ruling (AAR) determined that Nicotine Polacriliex Lozenge (NPL) is appropriately classified under Chapter Heading 38.24 instead of Chapter Heading 3004 as argued by the pharmaceutical company. NPL, designed to aid in smoking cessation, falls under the category of "Miscellaneous chemical products." Consequently, NPL is subject to a GST rate of 18% (9% CGST and 9% SGST) as per Serial Number 97 of Schedule III to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.

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Issues Involved:
1. Appropriate classification of Nicotine Polacriliex Lozenge (NPL).
2. Applicable rate of tax under Notification 01/2017-Central Tax (Rate), dated 28-06-2017.

Issue-wise Detailed Analysis:

1. Appropriate Classification of Nicotine Polacriliex Lozenge (NPL):

The applicant, a pharmaceutical company, developed a product named Nicotine Polacriliex Lozenge (NPL), used to alleviate withdrawal symptoms associated with nicotine cessation. The applicant sought an advance ruling on the classification and applicable tax rate for NPL under the CGST Act, 2017.

The applicant argued that NPL should be classified under Chapter Heading 3004, which covers "Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses." They claimed that NPL, being a medicament used for therapeutic purposes, should attract a GST rate of 12% under entry no. 63 of Schedule II of Notification 01/2017-Central Tax (Rate).

However, the Authority for Advance Ruling (AAR) examined the product's composition and usage. NPL consists of nicotine, an alkaloid present in tobacco leaves, used in measured doses to help individuals quit smoking. The AAR referred to the Explanatory Notes of the Harmonised Commodity Description and Coding System, which exclude preparations intended to assist smokers in quitting smoking from Chapter Heading 3004. Specifically, the notes exclude "Preparations, such as tablets, chewing gum, or patches (transdermal systems), intended to assist smokers to stop smoking" from this heading.

Given this exclusion, the AAR determined that NPL does not fall under Chapter Heading 3004. Instead, the AAR considered other potential classifications and concluded that the appropriate classification for NPL is under Chapter Heading 38.24, which covers "Miscellaneous chemical products."

2. Applicable Rate of Tax:

Once the classification was determined, the applicable GST rate followed suit. The AAR referred to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, which specifies the tax rates for various goods.

Since NPL was classified under Chapter Heading 38.24, the AAR found that it falls under Serial Number 97 of Schedule III of the said notification. Consequently, the applicable GST rate for NPL is 18% (9% CGST and 9% SGST).

Ruling:

The AAR ruled that the product Nicotine Polacriliex Lozenge is rightly classifiable under Chapter Heading 38.24. Accordingly, it is covered under Serial Number 97 of Schedule III to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST at the rate of 18% (9% CGST and 9% SGST).

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