Retrospective place-of-supply rule for R&D and clinical trial services to foreign recipients under N/N 04/2019-IGST upheld; GST demand set aside

The dominant issue was whether N/N 04/2019-IGST dated 30.09.2019, deeming place of supply for specified R&D/clinical trial services as the recipient's location, applied retrospectively to the period April 2018-March 2019. The HC held the notification was clarificatory and beneficial, issued pursuant to the 37th GST Council decision to clarify GST liability for services provided to foreign recipients; applying the principle that elucidatory amendments/notifications operate retrospectively (including per SC law on beneficial circulars/notifications), it concluded the services' place of supply was outside India where the recipient was located, so GST could not be demanded. Consequently, the impugned adjudication and appellate orders were set aside and the petition was allowed.

---

---

Issues: Whether Notification No. 04/2019-Integrated Tax dated 30.09.2019 (issued pursuant to the 37th GST Council recommendations) is clarificatory and retrospective in operation, and consequently whether the petitioners provision of clinical trials to a foreign recipient qualifies as export of services exempt from GST for the subject period (April 2018 to March 2019).

Analysis: The notification was issued following the 37th GST Council recommendations which identified specific R&D and pharmaceutical services, including clinical trials, and recommended that the place of supply be the location of the service recipient. The statutory framework involves Sections 13(2) and 13(3)(a) of the IGST Act and the power under Section 13(13) to notify circumstances where place of supply shall be the place of effective use and enjoyment. The factual matrix establishes that the recipient of the services was located outside India (USA) and that the services fall within the categories addressed by the Council. Principles of statutory interpretation concerning retrospectivity were applied: where an amendment or notification is clarificatory, declaratory or elucidatory of pre-existing law, it operates retrospectively; beneficial clarificatory measures that remove doubt as to tax liability are to be given retrospective effect. Relevant precedents distinguishing prospectivity and retrospectivity and recognising retrospective effect for clarificatory notifications and amendments were applied to the facts, including consideration of vested rights and the nature of the charging provision prior to clarification.

Conclusion: The notification dated 30.09.2019 is clarificatory and retrospective in operation; accordingly the petitioners clinical trial services to a foreign recipient qualify as export of services and the impugned orders imposing GST for the subject period are set aside in favour of the assessee.

---