2019 (10) TMI 871 - AAR - GST

Interpretation of GST Rates for Pharmaceutical Reference Standards

In Re: M/s. CHROMACHEMIE LABORATORY PVT. LTD.

The case involved determining the applicability of Entry No. 80 in Schedule II of Notification No. 1/2017-Integrated Tax (Rate) for 'Prepared Laboratory ... Whether Entry No. 80 in Schedule II to the Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017 (as amended) is applicable for import as well as supply of “Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS) attracting a levy of Integrated Tax at the rate of 12% or Entry No.453 to Schedule III attracting a levy of Integrated Tax at the rate of 18%? HELD THAT:- It is also undisputed that the PRS is a reagent and this reagent is not used for diagnostic purposes. The reagents used for diagnostic purposes are covered under HSN 3822 0011 to 3822 0019 and reagents used other than for diagnostic purposes are classified under 3822 00 90. The applicant also agrees that the goods in question is “Prepared laboratory reagents without a backing, other than those of heading 3002 or 3006” and is used exclusively for a specified analytical calibrating and referencing purposes and classifiable under HSN 3822 00 90. The description of the entry 80 reads “all diagnostic kits and reagents” means all diagnostic kits and all diagnostic reagents. The principle of ejusdem generis is applicable and reagents of the class of diagnostic reagents are covered under the entry no.80 of Schedule II of the said Notification. The contention of the applicant that there are two classes of goods covered under the said description, “All diagnostic kits” and “reagents” cannot be accepted for the reason that the words “diagnostic” is not just applicable to “kits” but also “reagents”. Hence it is very clear that commodities of HSN code 38220011, 38220012 and 38220019 which are for medical diagnosis are covered under the entry no. 80 of the Schedule II of the said Notification and not all laboratory reagents. The applicant also agreed that the goods he is dealing is not a diagnostic reagent but a laboratory reagent. The Prepared Laboratory Reagents or Pharmaceutical Reference standards (HSN 3822 00 90) which are not diagnostic reagents are not covered under Entry No.80 of Schedule II of Notification No. 1/2017 - Integrated Tax (Rate) dated 28.06.2017 and is covered under entry no.453 of Schedule III of Notification No. 1/2017 -Integrated Tax (Rate) dated 28.06.2017 and attracts IGST at 18%. Issues Involved:1. Applicability of Entry No. 80 in Schedule II of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017.2. Classification of 'Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)' under the appropriate GST rate.3. Determination of whether PRS should attract a levy of Integrated Tax at the rate of 12% or 18%.Detailed Analysis:1. Applicability of Entry No. 80 in Schedule II of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017:The applicant, M/s Chromachemie Laboratory Private Limited, sought an advance ruling on whether Entry No. 80 in Schedule II to the Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017, which attracts a levy of Integrated Tax at the rate of 12%, is applicable for the import and supply of 'Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)'.2. Classification of 'Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)' under the appropriate GST rate:The applicant argues that PRS, classified under Tariff Item 3822 00 90 of the Customs Tariff Act, should be covered under Entry No. 80 of Schedule II of the Rate Notification, which provides for a GST rate of 12%. The applicant supports this by stating that PRS is a 'prepared laboratory reagent' used exclusively for specified analytical calibrating and referencing purposes and not for detection or diagnosis.The applicant further submits that the classification of PRS under Tariff Item 3822 00 90 is undisputed and has been upheld by the Hon’ble CESTAT, Bangalore, and the Hon’ble Supreme Court. The applicant also refers to the HSN Explanatory Notes, which indicate that prepared laboratory reagents include other analytical reagents used for purposes other than detection or diagnosis.3. Determination of whether PRS should attract a levy of Integrated Tax at the rate of 12% or 18%:The applicant contends that the term 'reagent' in Entry No. 80 of Schedule II includes both diagnostic reagents and prepared laboratory reagents. The applicant argues that the term 'reagent' is wide enough to encompass PRS, which should be subject to a 12% GST rate.The applicant also refers to various judicial decisions to support the claim that the term 'reagent' should be understood in a conjunctive sense, separating 'all diagnostic kits' and 'reagents' as distinct categories. The applicant further submits that there is no specific exclusion or qualification before the word 'reagent' in Entry No. 80, indicating that both laboratory reagents and diagnostic reagents should be covered under this entry.Findings & Discussion:The authority considered the submissions and found that there is no dispute regarding the HSN Code applicable to PRS being 3822 00 90. However, the issue is whether PRS is a diagnostic reagent or not. The authority noted that the description of Entry No. 80 reads 'all diagnostic kits and reagents,' meaning all diagnostic kits and all diagnostic reagents. The principle of ejusdem generis applies, indicating that only diagnostic reagents are covered under Entry No. 80.The authority concluded that the word 'and' is conjunctive, joining 'diagnostic kits' and 'diagnostic reagents' under a common category. Since PRS is not a diagnostic reagent but a laboratory reagent, it does not fall under Entry No. 80 of Schedule II. Instead, PRS falls under Entry No. 453 of Schedule III, which covers goods not specified in other schedules and attracts a GST rate of 18%.Ruling:The Prepared Laboratory Reagents or Pharmaceutical Reference Standards (HSN 3822 00 90), which are not diagnostic reagents, are not covered under Entry No. 80 of Schedule II of Notification No. 1/2017 - Integrated Tax (Rate) dated 28.06.2017. They are covered under Entry No. 453 of Schedule III of Notification No. 1/2017 - Integrated Tax (Rate) dated 28.06.2017 and attract IGST at 18%.