2022 (3) TMI 179 - AAR - GST

Pharmaceutical Pellets and Granules Qualify as Medicaments Under GST, Taxable at 12% Instead of 18%

In Re: Smt. Rama Devi Guttikonda (M/s. Spansules Formulations, )

The AAR ruled that pharmaceutical pellets and granules manufactured by the applicant qualify as medicaments under the GST notification and are taxable at ... Classification of goods - pharmaceutical Pellets and Granules - to be classified as Medicaments under Sl.No.62 of Schedule II of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017? - taxable to GST at the rate of 12%? - HELD THAT:- Each of the products has a therapeutic or prophylactic uses such as treatment of fungal infection, muscle relaxing for prostane, treatment of nausea, parkinsons, depression, gastro esophageal reflex disease, hay fever, pain and fever, strokes, joint stiffness, inflammation, headache and high blood sugar. However, for one product by name Orlistat, the use is given as weight loss and not treatment of any disease. Obesity is not a disease and hence reduction of weight cannot be seen as a treatment against a disease - therefore except the product Orlistat which does not fit into the above definition, others fall under medicaments used in therapeutic or prophylactic applications. The commodities dealt by the applicant except Orlistat qualify to fall under Serial No. 62 of the 2nd Schedule to the Notification No. 01/2017 dated:28.06.2017 and therefore are liable to be taxed at the rate of 12%. Issues: Classification of pharmaceutical Pellets and Granules as Medicaments under GST Act at a specific tax rate.Analysis:Issue 1: Application and AdmissibilityThe applicant filed an application under Section 97(1) of the TGST Act, 2017 seeking an advance ruling on the classification of pharmaceutical Pellets and Granules for GST purposes. The application fee was paid, and no objections were raised by the jurisdictional officer, leading to the admission of the application.Issue 2: Interpretation of GST ActsThe provisions of both the CGST Act and the TGST Act were considered to be the same unless specified otherwise. The term 'GST Act' was used as a common reference for both acts throughout the ruling.Issue 3: Facts of the CaseM/s. Spansules Formulations claimed that they were paying 18% tax on pharmaceutical Pellets and Granules under CGST & SGST, but believed they should be taxed at 12%. The products were described as not in measured doses suitable for retail sale.Issue 4: Questions RaisedThe main question raised was whether the pharmaceutical Pellets and Granules could be classified as Medicaments under a specific entry in the GST notification and be subject to GST at a reduced rate of 12%.Issue 5: Personal HearingDuring the personal hearing, the applicant's representatives argued that the products fell under a lower tax rate category as per their interpretation of the GST notification.Issue 6: Discussion & FindingsThe ruling authority examined the products and their constituents, finding that they met the criteria to be classified as Medicaments under a specific entry in the GST notification. The products were not in measured doses for retail sale and had therapeutic or prophylactic uses, except for one product related to weight loss.Issue 7: Legal InterpretationThe ruling referred to the Hon'ble Supreme Court's interpretation of 'therapeutic or prophylactic' uses and concluded that the products, except for the weight loss-related one, qualified as medicaments used for therapeutic or prophylactic purposes.Issue 8: RulingThe ruling clarified that the pharmaceutical Pellets and Granules, except for the weight loss-related product, could be classified as medicaments under the specified entry in the GST notification and were subject to GST at the rate of 12%.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the authority's decision regarding the classification of pharmaceutical Pellets and Granules under the GST Act.