TaxTMI 
TaxTMI 
2025 (6) TMI 501
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.... b. Whether the Applicant is entitled to take credit of IGST paid by the "logistics service provider" [under DDP (Delivered Duty Paid) model of shipment] under section 3 (7) of the Customs Tariff Act, 1975 r/w section 5 (1) of the IGST Act while importing the sample drugs, in terms of section 16 (1) of the CGST Act, where the Applicant is the Importer on Record? c. Whether the Applicant is entitled to take credit of Central Goods and Services Tax ("CGST") paid by the Applicant under section 7 r/w section 9 of the CGST Act for the services of Customs House Agent received by the Applicant, in terms of section 16 (1) of the CGST Act? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT: 1.1. The Applicant is a Compa....
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....to India Applicant rarely takes title to the comparator drugs and ancillary supplies when it imports them into Indian. 1.5. The import of the sample drugs for the purpose of clinical trials in India would be in pursuance of the license issued by the Drug Controller General of India ("the DCGI") in the name of the Applicant, being the person responsible for monitoring the clinical trials in India. The License, inter-alia, authorises the licensee i.e. the Applicant in the present case to import the sample drugs from the specified foreign manufacturer (Sponsor) for conducting clinical trials. Further, the license also contains the details of the hospitals / clinics where the trial is proposed to be conducted. Needless, to say that it is only the Applicant who is authorised to import the sample drugs by virtue of the license issued by the DCGI. 1.6. In this regard, the Applicant envisages following two routes for procuring the sample drugs: A. in the first route: (i) the Applicant would file the bills of entry for home consumption under section 46 of the Customs Act, 1962 ("the Customs Act") for customs clearance upon payment of Basic Customs Duty ("BCD") under ....
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....er undertakes to pay for the cost of all transportation, any loss due to damage during transit, and the payment of customs duty, import tariffs, and other relevant charges till the subject goods reach the agreed upon destination. (iv) Once the sample drugs are cleared from the Customs, the logistic service provider would then dispatch the sample drugs directly to the identified location of the hospitals or the clinics. As we understand, in some cases upon the instructions of the hospitals / clinics, sample drugs would be sent to identified warehouses from where the sample drugs would be subsequently delivered to respective hospitals / clinics as and when the same is required for carrying out tests. 1.7. In terms of the agreement signed between PPD Global and the Applicant, the Applicant is expected to provide Clinical Trial Co-ordination and Support Services, comprising of the following key activities: - Site / Investigator identification and qualification -Pre-study activities - Investigator's meeting and communications management - Study monitoring - As part of study monitoring, develop and maintain a system to ensure the s....
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....Added Tax laws, Excise laws, Service Tax, Entry Tax and other indirect taxes. On intra-state supply of goods and / or services, Central Goods and Services Tax ("CGST") is payable and on inter-state supply of goods and / or services, Integrated Goods and Services Tax ("IGST") is payable under the Integrated Goods and Services Tax Act, 2017 ("the IGST Act"). 2.2. In terms of Section 7 (2) of the IGST Act, import of goods is deemed to be inter-state supply of goods. Under sub-section (1) of Section 5 the IGST Act, IGST is payable on import of goods into India. Accordingly, Section 3 of the Customs Tariff Act, 1975 ("the Customs Tariff Act") was also amended with effect from 01.07.2017 and IGST became payable under subsection (7) of Section 3 of the Customs Tariff Act on import of goods into India. 2.3. Further, Section 20 of the IGST Act read with Section 16 of the CGST Act provides that IGST paid on import of goods can be utilized as the credit of the input tax if such imported goods are used in the course or furtherance of business. By virtue of Section 20 of the IGST Act, the provisions of the CGST Act relating to input tax credit would be mutatis mutandis applicable, so far ....
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....he relevant extract of the definition is reproduced hereunder: "17) "business" includes - (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (emphasis supplied) 2.9. On a combined reading of Section 16 (1) read with Section 2 (17) and 2 (102) of the CGST Act, it is evident that all goods and / or services used in activities in relation to or furtherance of business, whether used or intended to be used, as also the services availed prior to commencement of operations, are covered within the scope of Section 16 (1) of the CGST Act, and therefore, credit on the same is allowed to the registered person. 2.10 The words 'in the course or furtherance' furth....
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....s in India undertaken by hospitals / clinics. For the purpose of undertaking the clinical trials, the hospitals / clinics need the sample drugs. As per the license issued by DCGI in relation to the clinical trials, it is only the Applicant who can import the sample drugs into India. Thus, the Applicant's scope of services encompasses within itself the activity of coordinating the supply of sample drugs to the hospitals / clinics conducting clinical trials. 2.15. Therefore, the IGST paid while importing the sample drugs is eligible as input tax credit in terms of section 16 (1) of the CGST Act in as much as, the sample goods are used in course or in furtherance of business which is taxable. 2.16. Reliance is placed on the ruling of the Hon'ble Authority of Advance Ruling, Karnataka in the matter of KARDEX INDIA STORAGE SOLUTION PVT. LTD. reported in 2020 (35) G.S.T.L. 424 (A.A.R. - GST - Kar.). In the said matter the party sought advance ruling, inter-alia, seeking clarity with respect of eligibility of IGST, paid on import of goods which was further used in course and furtherance of business, as Input Tax Credit in terms of section 16 (1) of the CGST Act. Answering in affirma....
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....at it is a must / necessity that it needs testing and hence, the same forms an integral part of manufacture and without which it is not possible to manufacture the final products." 2.19. Further in Thermax Culligan Water Technologies Ltd. v. Commissioner of Central Excise [2014 (312) E.L.T. 148 - 2013-VIL-1812-CESTAT-MUM-CE] the Tribunal has held: "5.3 As regards the demand on control samples of purified water, it is an admitted position that the samples had been drawn as per the norms fixed by the Food and Drugs Authorities. These were retained to test the shelf-life of the product of each batch and to analyse the customer complaints. Therefore, it cannot be said that the appellant had cleared the control samples for purposes other than those stipulated. There is also no evidence led by the Revenue to show that the appellant did not put to use the control samples by clearing them to customers. 2.20. In the case of Commissioner of C. Ex., Ahmedabad-II Versus Cadila Healthcare Ltd. 2013 (30) S.T.R. 3 (Guj.), the question before the Hon'ble Gujarat High Court was whether Cenvat credit on the service of technical testing and analysis could be allowed. In this context, t....
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....le drugs, even though the payment of IGST is discharged by the logistics service provider / Sponsor. Statement with regard to Question No. 3 2.25. The Applicant would be entitled to take credit of CGST paid by the Applicant under section 7 r/w section 9 of the CGST Act for the services of Customs House Agent received by the Applicant, in terms of section 16 (1) of the CGST Act in as much as the CHA services would be received for procuring the sample drugs. As demonstrated in the foregoing paragraphs, where the goods imported itself could be considered to be in course of or in furtherance of business, the services received for procuring the subject goods would also be in course and in furtherance of business. 2.26. In paragraphs above, it is demonstrated as to how the custom clearance of the sample drugs is part of the taxable services rendered by the Applicant. For customs clearance, the services proposed to be received by the Applicant, in corollary is therefore in course of and in furtherance of business. 2.27. Even in the erstwhile regime, tax paid on the service of Customs House Agents was included in the definition of input services in rule 2 (1) of the CENVAT Cred....
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....GST paid (as part of the customs duty) on the import of sample drugs as credit available to the Applicant. 03. CONTENTION - AS PER THE CONCERNED OFFICER: This office provide the facts in the case of M/s. PPD Pharmaceutical India Pvt. Ltd. holding of GSTN 27AADCP2043E1ZT, has filed Advance Ruling Application to your office. The questions along with this office remark as below- Sr.No. Question This office Remark 1. Whether the Applicant is entitled to take credit of Integrated Goods and Services Tax ("IGST") paid by the Applicant under section 3 (7) of the Customs Tariff Act, 1975 r/w. section 5 (1) of the Integrated Goods and Service Tax Act, 2017 ("the IGST Act") while importing the sample drugs, in term of section 16 (1) of the CGST Act? The Taxpayer Import the drug for Clinical Trial and provide the same to the hospitals free of cost. Hence, as per CBIC Circular No. 92/11/2019 dated 7th March, 2019, the said ITC is ineligible as per section 17 (5) of CGST/MGST Act, 2017? 2. Whether the Applicant is entitled to take credit of IGST paid by the "logistics service provider" [under DDP (Delivered Duty Paid) model of shipment] u/s. 3 (7) of the Customs ....
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....proached by PPD Global, for which it is paid by PPD Global in convertible foreign exchange on a cost-plus basis. 5.2 In terms of the agreement signed between PPD Global and the Applicant, the Applicant is expected to provide Clinical Trial Co-ordination and Support Services, comprising of the following key activities: - Bite / Investigator identification and qualification - Pre-study activities - Investigator's meeting and communications management - Study monitoring - As part of study monitoring, develop and maintain a system to ensure the study sites have adequate investigational product 5.3 Further, the scope of managing the clinical trials encompasses within its ambit the following functions: - Identifying appropriate investigators by evaluating their facilities, patient population, fees payable for the services - Ensuring the trial is conducted as per the Sponsor protocol - Studying the results of the trials, involving analysis and submission of reports (which is the primary essence of the service rendered by PPD) - Miscellaneous activities such as obtaining regulatory approvals, ensuring ad....
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....) of the CGST Act? a. To determine eligibility of Input Tax Credit of IGST paid by the applicant, we have to go through the provisions of Section 20 of IGST and Section 16 (1) of the CGST Act which reads as reads as follows: Section 20 of IGST SECTION 20. Application of provisions of Central Goods and Services Tax Act. - Subject to the provisions of this Act and the rules made thereunder, the provisions of Central Goods and Services Tax Act relating to, - ..... ..... (iv) input tax credit ..... ..... shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act. Eligibility of ITC under Section 16 of the CGST Act As per Section 16 (1) of the CGST Act 'Every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner, specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business'. b. The appl....
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....upply' as per the Act. Hence, the input tax credit shall also be not in respect of said goods. Clarification regarding free samples given in circular is reproduced here as- "Free samples and gifts: i. It is a common practice among certain sections of trade and industry, such as, pharmaceutical companies which often provide drug samples to their stockists, dealers, medical practitioners, etc. without charging any consideration. As per sub-clause (a) of sub-section (1) of section 7 of the said Act, the expression "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Therefore, the goods or services or both which are supplied free of cost (without any consideration) shall not be treated as „supply "under GST (except in case of activities mentioned in Schedule I of the said Act). Accordingly, it is clarified that samples which are supplied free of cost, without any consideration, do not qualify as "supply" under GST, except where the activity falls within the ambit of Schedul....
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....once the goods reach the customs frontiers of India. However, the Applicant would continue to remain as the importer on record, as the Applicant only who can import the drug into India pursuant to the license issued by DCGI. c. This means the importer on record would be the Applicant in the Bill of Entry, whereas the BCD and IGST payable on import would be discharged / paid by the logistics service provider/ PPD Global / Sponsor. After clearance from the Customs, the logistic service provider would dispatch the sample drugs on delivery challans directly to the identified location of the hospitals or the clinics for clinical trials. In this model also any commercial invoice would not be raised by the applicant. Applicant will not receive any consideration from hospitals or clinics where clinical trials are to be conducted. Here also sample drugs will be supplied free of cost to hospitals and clinics for clinical trials. 5.10.3. Whether the Applicant is entitled to take credit of Central Goods and Services Tax ("CGST") paid by the Applicant for the services of Customs House Agent and Logistics services provider received by the Applicant, in terms of section 16 (1) of the ....