TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 177
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.... would also mean reference to the corresponding similar provisions in the APGST Act, 2017. 3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The applicant has paid Through Electronic Cash Ledger Rs. 5,000/- under SGST (DC3707250039252 dated 15.07.2025), and another Rs. 5,000/- under CGST (DC3707250039252 dated 15.07.2025) towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act. 4. Brief Facts of the case: 4.1 Laila Nutra Private Limited (Applicant) is Private Limited Company converted from Partenership firm Laila Nutraceuticals engaged in the business of extraction of Concentrate from Herbs and Other Products. The entity is registered under the Companies Act 2013, on 16-04-2025 with registered office at Vijayawada. The applicant is registered under the erstwhile Statues and got migrated to GST vide GSTN37AAGCL2515G1ZO. The applicant is allotted to the Central Tax Jurisdiction, Krishna Lanka Range, Amaravathi Division, Guntur Commissionerate. 4.2 The applicant....
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....ed in Project 1. This report is intended to be placed in the public domain to serve as a reference for other Ayurveda and Herbal Medicine manufacturers in the long term. As the Sub-Nodal Agency, the applicant was granted a User ID in the Public Finance Management System (PFMS) - the Central Government's official payment and fund disbursement module. The applicant is required to invite quotations from a minimum of three vendors for any procurement of raw material. All procurement and payment processes are strictly governed by the General Financial Rules (GFR) of the Government of India. For initiating any vendor payment, the applicant must upload vendor invoices and relevant procurement details in the PFMS portal. Once a payment is initiated through the applicant's PFMS login, the amount is credited to the applicant's bank account and is immediately transferred to the vendor's bank account without retention. Being entrusted with handling public funds and functioning as a Sub-Nodal Agency of a Central Government Department, the applicant is obligated to comply with all provisions of the General Financial Rules (GFR) for both vendor payments and grant utilization, including infrast....
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....objectives of the Central Council. 2. To create administrative, technical, ministerial, and other posts under the Society and make appointments in accordance with its rules and regulations. 3. To establish a provident fund and/or pension fund for the benefit of employees of the Central Council and/or their family members. 4. To carry out all lawful activities, independently or in collaboration with others, that are necessary or helpful in achieving the Council's objectives. 5. To undertake research and development (R&D) consultancy projects and transfer patents on drugs and processes to the industry. 6. To undertake R&D projects sponsored by public or private sector industries. 7. To engage in international and inter-agency collaborations for joint research and knowledge exchange. 8. To utilize the outcomes of research conducted and provide a share of royalties or consultancy fees to contributors involved in such research. 9. To enter into arrangements with scientific organizations in other countries to exchange scientists, conduct study tours, provide training in specialized fields, and undertake joint researc....
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.... critical for regulatory submissions and assists in approval processes from agencies such as the Ministry of AYUSH, CDSCO (India), US FDA, EMA (Europe), and WHO Contents of a DMF for Single Botanicals in Ayurveda Botanical Identification & Standardization Scientific name, common name, botanical family, and part used (e.g., root, leaf, bark). Morphological and microscopic characteristics of the botanical. Authentication methods and reference standards used for verification Cultivation & Collection Practices Sourcing Wild-sourced and/or cultivated raw materials. Good Agricultural and Collection Practices (GACP) * Adherence to WHO-GACP or national guidelines to ensure quality, traceability, and sustainability. Manufacturing Process • Harvesting and Processing Techniques • Standardized collection times, part of the plant used, and initial processing (washing, cutting, etc.). • Drying, Extraction, and Standardization Methods Controlled drying conditions to preserve phytochemicals. Solvent extraction (aqueous, hydroalcoholic, etc.) methods and concentration ....
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....erapeutic effects based on Ayurvedic principles such as dosha balancing, rasa, virya, vipaka, and karma. * Modern Pharmacological Evidence * In-vitro, in-vivo, or clinical studies that support the claimed efficacy and pharmacodynamic properties of the herb/botanical Formulation Development & Dosage Types of Formulations: Includes various traditional and modern dosage forms such as: * Churna (powder formulations) * Kwath (decoctions) * Tablets and capsules * Syrups and suspensions * Oils (Taila) and liniments * Ointments and creams * Granules and lozenges Recommended Dosage & Method of Administration: * Dosage recommendations vary based on age, weight, condition, and specific formulation. * Typically administered orally, topically, or via nasal or rectal routes depending on the formulation. * Dosage and administration should be as per classical Ayurvedic texts or validated through clinical studies. * Physician consultation is essential for personalized dosage. Clinical Studies & Efficacy Data * Preclinical and Clin....
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....ble as sanctioned limits for making payments to vendors and for other project-related expenses. The applicant carries out these projects on a no-profit, no-commercial motive basis. All procurement details, administrative overheads, and internal costs incurred in connection with the project must be submitted to the competent authority. As per the definition of "consideration" under the GST law, any subsidy received from the Central or State Government is excluded from the ambit of consideration. The grant received from the Ministry of AYUSH is akin to such a subsidy, and hence, does not qualify as consideration under GST. 6. Questions raised before the authority: The applicant sought advance ruling on the following: 1. Whether the Research and Development activity undertaken by the applicant for the Ministry of AYUSH (MoA), through the Central Council for Research in Ayurvedic Sciences (CCRAS), under a grant-in-aid arrangement, falls within the scope of 'supply' as defined under Section 7 of the CGST Act, 2017? 2. If the aforementioned Research and Development activity is considered a 'supply' under Section 7 of the CGST Act, 2017, whether such activity qu....
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....ervices or composite supply of services as per Entry No. 3 and 3A of Notification No. 12/2017-Central Tax (Rate) read with Notification No. 2/2018-Central Tax (Rate). Furthermore, these services are rendered under the "Ayurgyan" scheme, and the applicant has been designated as a sub-nodal agency under this scheme. The grant is allotted as a limit in the PFMS system, and there is no markup or profit component in the execution of the projects. Under the Goods and Services Tax (GST) law, a transaction is liable to GST only if it qualifies as a "supply" as defined under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017. Section 7 of the CGST Act outlines the scope of supply, and to be considered as a "supply", a transaction must satisfy the following essential elements: 1. It must be a form of transaction such as sale, transfer, barter, exchange, license, rental, lease, or disposal; 2. It must be made for a consideration; 3. It must be made in the course or furtherance of business. Let us examine the present transaction in light of the above criteria: 1. Nature of Transaction - Sale, Transfer, Barter, Exchange, License, Rental....
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.... of Supply and Consideration under GST in Relation to R&D Activities Funded by CCRAS Ownership and Scope of Supply: The terms rental, lease, and disposal relate to the transfer or permitted use of assets. However, in the present case, the supplier does not possess any ownership rights over the property or the intangible assets (such as intellectual property) resulting from the R&D activity. Accordingly, the supplier cannot transfer, rent, or lease what he does not legally own. There is a well-established legal principle: nemo datquod non habet - one cannot transfer what one does not possess. Since the R&D activities are carried out entirely with the financial assistance of the Central Council for Research in Ayurvedic Sciences (CCRAS), and under its guidance, the supplier (applicant) retains no proprietary rights over the outcomes or any intellectual property arising from the research. Therefore, the supplier is not in a position to rent, lease, or dispose of any such outcome. According to the Oxford English Dictionary, the term license is defined as "a formal or written permission." In the present case, neither the applicant nor CCRAS is granting any license to the oth....
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....ssistance provided by CCRAS cannot be treated as consideration liable to GST. Government and Nodal Agency: The Ministry of Ayush (MoA), a department under the Government of India, is entrusted with the development, promotion, and propagation of traditional and alternative systems of medicine such as Ayurveda, Yoga & Naturopathy, Unani, Siddha, and Homoeopathy (collectively known as AYUSH). A nodal agency refers to an institution or body designated by the Government to act as the central coordinating entity for implementing specific schemes or policies. In the present case, the MoA has designated the Central Council for Research in Ayurvedic Sciences (CCRAS) as its nodal agency for execution of the project under the Ayurgyan Scheme. The Ministry, through CCRAS, has sanctioned a 100% grant to the applicant solely for executing a research project. The explicit objective of this project is to generate a final report that will be made freely available in the public domain. The intent behind this is to allow wide and unrestricted use of the findings by other manufacturers and stakeholders in the field of medicine, thereby supporting public healthcare objectives. Given that....
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....ferring goods or services in a manner that constitutes a "sale" or similar supply defined under Section 7(1)(a). Accordingly, the transaction lacks the key elements required for a supply under GST, namely: 1. Supply type (sale, transfer, license, etc.) 2. Consideration 3. Business purpose Hence, the transaction does not qualify as a "supply" under GST. Question 2: If the R&D activity is considered a supply under GST, can the exemption under Entry No. 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) be claimed? Even if, hypothetically, the R&D activity is treated as a "supply", such supply may qualify for exemption under Notification No. 12/2017 - Central Tax (Rate) dated 28th June 2017, as amended by Notification No. 2/2018 and Notification No. 16/2021. Relevant Entries: Entry No. 3: Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government, Union Territory, or local authority in relation to any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. Entry No. 3A: ....
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....e (Article 243W of the Constitution) - "Public health, sanitation, conservancy and solid waste management". 3. The services are being provided under the "Ayurgyan" scheme of the Ministry of AYUSH (MoA), Government of India, specifically to the Central Council for Research in Ayurvedic Sciences (CCRAS), which is a subordinate office under the Ministry. 4. In one of the projects, although there is a minor component of goods involved (provided as samples to CCRAS), their value is less than 10% of the total project cost. Therefore, the said project qualifies as a "composite supply" where the principal supply is of services, and hence it falls under Entry No. 3A of the above Notification. 5. For further substantiation, we will enclose the instructions received from CCRAS showing the scope of work and the negligible value of goods involved, thereby confirming the nature of the project as a composite supply of services. 6. Based on the above, even if the research and development work undertaken is classified as a "supply" under the CGST Act, it squarely falls within the ambit of Entry 3 and Entry 3A of Notification No. 12/2017, and hence is exempt from GST. 7. Additionally,....
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....s defined as "a formal or written permission." In the present case, neither the applicant nor CCRAS is granting any license to the other. There is no agreement executed between the parties to grant such rights. Thus, the condition or factor of licensing, which might otherwise bring a transaction within the ambit of "supply" under GST, is not satisfied. Hence, the primary criterion under Section 7 of the CGST Act, 2017 - relating to the existence of a "supply" involving transfer, lease, rental, or license - is not met in this case. Further, the applicant contended that the Ministry of Ayush (MoA), is a department under the Government of India, which is entrusted with the development, promotion, and propagation of traditional and alternative systems of medicine such as Ayurveda, Yoga & Naturopathy, Unani, Siddha, and Homoeopathy (collectively known as AYUSH); the MoA has designated the Central Council for Research in Ayurvedic Sciences (CCRAS) as its nodal agency for execution of the project under the Ayurgyan Scheme; the Ministry, through CCRAS, has sanctioned a 100% grant to the applicant solely for executing a research project. The explicit objective of this project is to gener....
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....blic-funded research initiative. Therefore, it cannot be said to be undertaken "in the course or furtherance of business" as required under Section 7 of the CGST Act. 9.2.3 The applicant contended that neither the Ministry of Ayush nor its nodal agency CCRAS are engaged in any commercial or business activity. Their actions, particularly under the Ayurgyan Scheme, are directed toward promoting public health by fostering awareness and adoption of AYUSH systems in the healthcare ecosystem; that though it is primarily engaged in the business of manufacturing and selling extracts derived from Ayurvedic and herbal raw materials, the current project undertaken by it is not a commercial venture as it is being executed solely as per the directives and funding of the MoA/CCRAS, without any commercial intent or profit motive; that it is not retaining or claiming any intellectual property rights over the outcomes or findings of the said project. The results are intended for free public dissemination, further confirming that the project falls outside the scope of the applicant's regular course of business. 9.2.4 Finally, the applicant contended that as per Section 7(1)(a) of the CGST Act,....
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....goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; (102) "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; 9.3.2 In order to arrive at a definitive conclusion on the taxability of service, the main ingredients which need to be necessarily present, as per GST statute, are the supply/service, the Supplier /s....
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....ness nexus) are satisfied. The applicant has acknowledged receiving financial assistance from CCRAS for the R&D activities. This financial assistance qualifies as consideration, as per Section 2(31) of the CGST Act, which includes any payment made in money or otherwise, in respect of the supply of goods or services. Whether the assistance is called a "grant" or otherwise is immaterial - what matters is that it is linked to the R&D services rendered by the applicant. Moreover, definition of "consideration" includes grants and excludes only "subsidy". 9.3.5 R&D services - even when not resulting in the transfer of ownership or IP - are nonetheless services under GST. As per Section 2(102) of the CGST Act, "services" means anything other than goods, money, and securities. The act of conducting research at the behest and under the guidance of CCRAS clearly amounts to a service, whether or not any tangible or intangible property is created or transferred. With the introduction of GST, Sl.No.19 of Notification number 11/2017-Central Tax (Rate), dated the 28th June, 2017, charges 18% of GST as follows: Chapter, Section or Heading Description of Service CGST Rate (%) SGST....
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....fied under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961. In view of the above discussion, it is held that the Research and Development activity undertaken by the applicant for the Ministry of AYUSH (MoA), through the Central Council for Research in Ayurvedic Sciences (CCRAS), under a grant-in-aid arrangement, falls within the scope of 'supply' as defined under Section 7 of the CGST Act, 2017. 9.4 If the aforementioned Research and Development activity is considered a 'supply' under Section 7 of the CGST Act, 2017, whether such activity qualifies for exemption under Entry No. 3 or Entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended? 9.4.1 The applicant contended that if the research and development work undertaken is classified as a "supply" under the CGST Act, it squarely falls within the ambit of Entry 3 and Entry 3A of Notification No. 12/2017, and hence is exempt from as per which "pure services" and "composite supply of goods and services", where the supply is made to the Central Government, State Government, Union territory, local authority, Governmental authority, or Government entity in relat....
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....o any function entrusted to a Municipality under article 243W of the Constitution Nil Nil 9.4.2 To claim exemption under the above entry, the condition to be satisfied is the activity must be in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution hence to understand it better the article 243G & 243W are being reproduced as follows:- Article 243G in The Constitution Of India 243G. Powers, authority and responsibilities of Panchayats Subject to the provisions of this Constitution the Legislature of a State may, by law, endow the Panchayats with such powers and authority and may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats, at the appropriate level, subject to such conditions as may be specified therein, with respect to (a) the preparation of plans for economic development and social justice; (b) the implementation of schemes for economic development and social justice as may be....
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.... and vocational education. 19. Adult and non-formal education. 20. Libraries. 21. Cultural activities. 22. Markets and fairs. 23. Health and sanitation, including hospitals, primary health centres and dispensaries. 24. Family welfare. 25. Women and child development. 26. Social welfare, including welfare of the handicapped and mentally retarded. 27. Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. 28. Public distribution system. 29. Maintenance of community assets. TWELVTH SCHEDULE (Article 243w) 1. Urban planning including town planning. 2. Regulation of land-use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections o....
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.... benefit of the general public and medicine manufacturers. Hence, this activity is also not directly in relation to any function entrusted to a Panchayat under Article 243G or Municipality under Article 243W of the Constitution. Even though the applicant contends that the supply of goods is below 10% of the contract value, which could satisfy the quantitative threshold, the qualifying condition regarding the functional nexus with Articles 243G/243W is not met. The key test here remains the same, whether the service is in relation to a function entrusted to and being carried out by a Panchayat or Municipality. In this case, the R&D services are not rendered to such authorities, and the activity is undertaken by a Central body (CCRAS), not under any decentralised governance framework. As held in numerous judicial pronouncements (e.g., Dilip Kumar & Co. v. Commissioner of Customs, [2018] 9 SCC 1), exemption notifications are subject to strict interpretation. If there is any ambiguity, the benefit of doubt must go to the Revenue. In the present case, the exemption conditions are not clearly or unambiguously satisfied. Further, the applicant's argument that CCRAS would have been r....