TaxTMI 
TaxTMI 
2026 (9) TMI 19
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....e Notification No.9/2025- Integrated Tax (Rate) dated 17.09.2025 under the Customs Tariff Act, 1975. 2. Question(s) on which Advance Ruling is required: Question 1: Whether Integrated Goods and Services Tax is leviable @5% for the import of bulk drugs in terms of SI. No. 226 of Schedule I of Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025 (hereinafter referred to as the 'IGST Rate Notification')? Question 2: If not, then what is the correct rate of IGST leviable for the import of bulk drugs falling under chapter 28 or 29 of the Schedule of Customs Tariff Act, 1975? 3. Applicant's eligibility for Advance Ruling: The applicant holds a valid IEC No. 0389057274 and therefore qualifies as an "applicant" under Section 28E(c) of the Customs Act' 1962. The question on which the advance ruling is sought is in respect of seeking clarification on whether Integrated Goods and Services Tax is leviable @5% for the import of "bulk drugs or Active Pharmaceutical Ingredient (API)" in terms of SI. No. 226 of Schedule-I of the Notification No.9/2025- Integrated Tax (Rate) dated 17.09.2025 under the Customs Tariff Act, 1975, which is admissible....
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....(at SI. No. 226 of Schedule I of Notification No. 9/2025-Integrated Tax (Rate) dated 17th September 2025) is extracted below: SI. No. Chapter/Heading/Sub- heading/Tariff item Description of goods 226. 30 or any Chapter All drugs and medicines including their slats and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September 2025] 4.5 SI. No. 113 of Notification No. 10/2025-Integrated Tax (Rate) dated 17" September, 2025 is extracted below: SI. No. Chapter/Heading/Sub- heading/Tariff item Description of goods 113. 30 or any Chapter Drugs or medicines listed in Annexure I 4.6 The above is the entry applicable for IGST at NIL rate. The products for which the present ruling is sought are not covered under Annexure I, therefore the same is not applicable in the present case. 4.7 The bulk drugs in question are imported after procuring the following licenses under the Drugs and Cosmetics Act, 1940: Form No./ License No. Title of License Issued Illustrative Copy enclosed herewith Form 10 License....
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....or medicines listed in Annexure I 4.13 The above is the entry applicable for IGST at NIL rate. The products for which the present ruling is sought are not covered under Annexure I, therefore the same is not applicable in the present case. 4.14 The Applicant submits that on import of bulk drugs, IGST @ 5% alone is applicable under the above extracted SI. No. 226 of Schedule I of Notification No. 9/2025-Integrated Tax (Rate). 4.15 For 5% IGST to be applicable, the imports should satisfy the following conditions: i. Be classified under Chapter 30 or any other Chapter; ii. Be Drugs or medicines; and iii. Not be covered under SI. No. 113 of Notification No. 10/2025-Integrated Tax (Rate) dated 17.09.2025 4.16 The bulk drugs in question satisfy all the above conditions. The submissions in this regard are set out in detail below: Condition i: The entry is applicable to goods irrespective of the classification adopted for the goods under any chapter. Chapter 30 is merely indicative and goods falling under any chapter can fall under this entry. 4.17 As per SI. No. 226 of the Schedule I, drugs and medicines classified under any Chapter fall u....
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....der in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; ] (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette; (iii) all substances intended for use as components of a drug including empty gelatin capsules; and (iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board; (emphasis supplied) 4.20 Thus, from a combined reading of the definition of bulk drugs under the Drugs (Price Control) Order, 2013 and the definition of drugs under the Drugs and Cosmetics Act, 1940, it is clear that that "drugs" includes substances used as components of a drug i.e. as an ingredient of a drug....
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..... 450/11/2011-Cus. IV, dated 25-2-2011 c. Circular No. 10/2016-Cus., dated 15-3-2016 d. Circular No. 28/2016-Cus., dated 14-6-2016 e. C.B.I. & C. Circular No. 44/2018-Cus., dated 13-11-2018 4.24 Thus, as the bulk drugs in question are "Drugs" under the Drugs and Cosmetics Laws of India, they must be considered as "drugs" even for purposes of IGST Notification. Even in common parlance, bulks drugs are "Drugs" 4.25 Even as per medical literature, bulk drugs are considered to be drugs only. Reference is also made to the definition of 'drug' and 'medicine' under medical dictionaries. The relevant portions are extracted below: Dictionary Definitions American Heritage Medical Dictionary * drug (drug) n. 1. A substance used in the diagnosis, treatment, or prevention of a disease or as a component of a medication. * Medicine * 4. An agent, such as a drug, used to treat disease or injury. " Dictionary of Medical Terms (fourth edition) * drug. a natural or synthetic chemical substance which is used in medicine and affects the way in which organs or tissues function * medicine. a preparation taken to treat a diseas....
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....he Drugs (Prices Control) Order, 1995 also. For this purpose, the Tribunal referred to and relied upon the decision of Tribunal, Mumbai Bench, in the case of Burroughs Welcome (India) Limited, referred above. Relevant portion of the above decision reads as under: "4. ... M/s. Burroughs Wellcome (I) Ltd. had imported Polymyxin B Sulphate and used the same along with some other ingredients in the manufacture of Neosporin. M/s. Pfizer Ltd. had imported Cefoperazone Sodium and used the same for manufacture of Cefoperazone Sodium Injections. The issue before the Tribunal was whether the above parties were eligible for the benefit of exemption from payment of CVD on the items imported by them, under SI. No. 43 (A) of Notification No. 11/97-CE and under the corresponding entries of successor Notifications. It was not in dispute that the imported items figured in List 2 appended to Sl. No. 43 (A) of the above Notification. While the Revenue classified the goods as 'bulk drugs' under Sl. No. 43(B), the assessees classified them as life saving drugs under SI. No. 43 (A). 'The Tribunal accepted the assessees contention and held that the drugs imported by them were to be c....
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.... present Drugs (Prices Control) Order 2013, the definition of "bulk drugs" under the Drugs (Prices Control) Order 2013, and the definition of "drugs" under the Drugs and Cosmetics Act, 1940 should be read conjointly. Reliance is placed on Clause (2) of the Drugs (Prices Control) Order 2013, as extracted below: "(2) All other words and expressions used herein and not defined but defined in the Act or the Drugs and Cosmetics Act, 1940 (23 of 1940) shall have the meanings respectively assigned to them in the said Acts." 4.32 Thus, in the absence of the definition of "drugs" under the current Drugs (Prices Control) Order 2013, reference is made to the Drugs and Cosmetics Act, 1940. As submitted in the foregoing paragraphs, from a combined reading of the present definitions under the Drugs (Prices Control) Order, 2013 and the Drugs and Cosmetics Act, 1940, it is clear that bulk drugs are to be treated as drugs only. 4.33 Further, in the present case when the notification also does not define drugs or bulk drugs, and nor does it make a specific distinction between the two, it is submitted that the interpretation that bulk drugs are drugs should be adopted. Reliance in this....
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....val of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001. Therefore, entire basis of the department that such procedure was not followed is not relevant. Since, the duty demand itself is not prima facie sustainable on the company, there is no question of imposing personal penalty on the employee of M/s. Sterlling Biotech Ltd. who is the appellant herein." (Emphasis supplied) 4.35 Thus, it is submitted that there is enough jurisprudence which treats the term "drugs" to include bulk drugs. Restricting the entry to cover only drugs and medicines for final consumption would render the entry to be redundant 4.36 From a perusal of the entry, it is clear that it covers the following: (a) all drugs and medicines; (b) salts and esters of such drugs and medicines; (c) diagnostic test kits; and (d) formulations manufactured from bulk drugs. 4.37 The usage of the semi colon (;) between "all drugs and medicines including their salts and esters and diagnostic test kits" and "formulations manufactured from bulk drugs" indicated that these are two separate items covered under the entry. 4.38 Reliance is placed o....
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....ndependent items not depending on each other at all as has been held in the case of Pyare Lal Mehrotra (supra)." 4.42 The Hon'ble High Court in TVL. Transtonnelstroy Afcons Joint Venture v. UOI, 2020 (43) G.S.T.L. 433 (Mad.) (para 41), it was every word of the statute should be given meaning and one should not construe a statute in such a way as to render certain words redundant. 4.43 Reliance is also placed on the decision of Printers (Mysore) Ltd. Vs. Assti. Commercial Tax Officer - 1994 (2) SCC 434. The relevant extract of the said judgement is as follows: "Even apart from the opening words in Section 2 referred to above, it is well settled that where the context does not permit or where it would lead to absurd or unintended result, the definition of an expression need not be mechanically applied. [Vide T.M. Kanniyan v. Income Tax Officer, Pondicherry and Anr. 1968 20 S.C.R. 103, Pushpa Devi and Ors. v. Milkhi Ram (Dead) by his L.Rs. MANU/SC/0149/1990 : [1990]1SCR278 [para 14] and Commissioner of Income Tax, Bangalore v. J.H. Gotla, Yadagiri MANU/SC/0126/1985: [1985]156ITR323(SC)." 4.44 Therefore, the entry should be interpreted in such a manner that it is ....
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....ingredient from a pharmaceutical formulation in comparison to the reference formulation having the same active ingredient when administered in the same molar dose under similar conditions *** (j) "clinical trial" in relation to a new drug or investigational new drug means any systematic study of such new drug or investigational new drug in human subjects to generate data for discovering or verifying its, - (i) clinical or; (ii) pharmacological including pharmacodynamics, pharmacokinetics or; (iii) adverse effects, with the objective of determining the safety, efficacy or tolerance of such new drug or investigational new drug;" 4.47 It is submitted that from a combined reading of the definitions of 'drugs', 'bioavailability study', 'bioequivalence study' and 'clinical trials', it is clear that drugs cover even those products which are for bioavailability or bioequivalence studies, or clinical trials. 4.48 It is submitted that the definitions of bioavailability study, bioequivalence studies and clinical trials would be rendered redundant if the definition of 'drugs' itself was construed to not ....
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....s an Exemption Notification and observed that the benefit of the IGST Rate Notification should be interpreted strictly and the burden to prove applicability would rest upon the tax payer and that the benefit of any ambiguity in the Notification must be interpreted in favour of the Revenue. The Principal Commissioner committed an error in assuming that the IGST Rate Notification is an Exemption Notification The IGST Rate Notification is at rate Notification and, therefore, a Taxing Notification. It has to be strictly construed and any ambiguity has to be interpreted in favour of the tax payer and against the Revenue as was observed by the Supreme Court in Safari Retreats." 4.54 From the above it is clear that a taxing notification, which prescribes a levy and is not prescribing an exemption, is to be interpreted in favour of the taxpayer. Reliance is also placed on the decision of the Supreme Court in Commissioner of Cus. (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), whereby it established the principle that in case of an ambiguity in a taxing statute and where two interpretations can be adopted, then the benefit of interpretation is to be given to the ....
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....Re: Biocon Ltd. 2020 (43) G.S.T.L. 281 (App. A.A.R. - GST - Kar.) * "Drugs" includes bulk drugs by relying on definition under the Drugs (Prices Control) Order 1995 * Customs Tariff provides a similar concessional rate of 5% (by way of exemption notification), and bulk drugs used in the manufacture of drugs are also covered. Customs Notification is worded in the same manner as the GST rate Notification - thus relevant for consideration. Squarely applicable in the present case as it has examined the definition of "drugs". 3. In Re: Sterling Biotech Ltd., 2021 (1) TMI 372 - AAR, Guj. * Only medicines and drugs are covered under the entry. * Bulk drugs are raw materials and cannot be directly administered to a human being. * The concessional rate of GST is applicable only to the medicine or drugs, which are ready for administering in the human being or person. * The word "Bulk Drugs" would have been included in the entry had the intention of the Government been to extend the benefit of concessional rate to the bulk drugs/raw material. The rulings are not applicable in the present case as they have not considered the complete definition of "drugs". They ha....
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....f bulk drugs ?. Applicant's Understanding: Not applicable 5. Port of Import and reply from jurisdictional Commissionerate The applicant in their CAAR-1 indicated that they intend to import the subject goods at the jurisdiction of Office of the (1) Commissioner of Customs, NS-II, JNCH, Nhava Sheva, Uran, Raigad, Maharashtra. (2) The Principal Commissioner of Customs (Import), Air Cargo Complex, Sahar, Andheri East, Mumbai. The application was forwarded to the concerned Commissionerates for their comments on 08.05.2026. No comments/reply were received from both of the jurisdictional Commissionerates. 6. Details of Personal Hearing: A personal hearing in the matter was held on 29.07.2026. During the personal hearing, the advocate appeared and submitted that the bulk drug proposed to be imported qualifies as a "drug" as defined under the Drugs and Cosmetics Act, 1940, the Drugs (Prices Control) Order, 2013, and in common parlance. It was further submitted that, since the subject goods are drugs and are covered under the relevant exemption entry at Sr. No. 226 of Schedule I to Notification No. 09/2025- Integrated Tax (Rate), the goods are eligible for levy of IG....
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.... 30 or any Chapter Drugs or medicines listed in Annexure I Annexure I appended to Schedule mentions the following item at Sr. No. 113 of the said notification. It is observed that the Applicant has not specified the individual names of the Bulk Drugs/APIs proposed to be imported. Therefore, the applicability of the exclusion contained in SI. No. 113 of Notification No. 10/2025-Integrated Tax (Rate) is required to be examined with reference to the individual goods at the time of import. On the basis of the material placed on record, no specific Bulk Drug/API proposed in the present application has been shown to be covered under Annexure-I. 7.4 Nature of the Goods 7.4.1 The Applicant imports bulk drugs, i.e. Active Pharmaceutical Ingredients (APIs), classifiable under Chapter 28 or Chapter 29 of the Customs Tariff. These APIs are used: i. In manufacture of pharmaceutical formulations; and ii. In certain cases, for testing, clinical trials, bioavailability and bioequivalence studies. 7.4.2 I observe that Active Pharmaceutical Ingredients (APIs) are substances which constitute an active component of a drug and are used in the manufacture of p....
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....) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; ] (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of 6 [vermin] or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette; ] 7 (iii) all substances intended for use as components of a drug including empty gelatin capsules; and (iv) such devices* intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time From the above definition of drugs, it is evident that drugs cover: * all medicines for internal or external use; * all substances intended for diagnosis, treatment, mitigation or prevention of....
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....y study" means a study to assess the rate and extent to which the drug is absorbed from a pharmaceutical formulation and becomes available in the systemic circulation or availability of the drug at the site of action; (f) "bioequivalence study" means a study to establish the absence of a statistically significant difference in the rate and extent of absorption of an active ingredient from a pharmaceutical formulation in comparison to the reference formulation having the same active ingredient when administered in the same molar dose under similar conditions *** (j) "clinical trial" in relation to a new drug or investigational new drug means any systematic study of such new drug or investigational new drug in human subjects to generate data for discovering or verifying its, -- (i) clinical or; (ii) pharmacological including pharmacodynamics, pharmacokinetics or; (iii) adverse effects, with the objective of determining the safety, efficacy or tolerance of such new drug or investigational new drug;" 7.5.6 I observe that a combined reading of the definitions of "drugs", "bioavailability study", "bioequivalence study" and....
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....e aforesaid rulings, the complete and inclusive definition of "drug" under Section 3(b)(iii), particularly in relation to substances used as components of a drug, has not been examined in its entirety. 7.7 Interpretation of SI. No. 226 of Schedule I of Notification No. 09/2025-Integrated Tax (Rate) 7.7.1 Sl. No. 226 employs the expression: "All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs". The presence of a semi-colon clearly demarcates two independent and distinct categories of goods, namely: (i) All drugs and medicines (including salts, esters and diagnostic kits); and (ii) Formulations manufactured from bulk drugs. 7.7.2 "If the phrase "All drugs and medicines" were to be construed as being confined solely to finished dosage forms ready for retail consumption, the subsequent and specific reference to "formulations manufactured from bulk drugs" would be rendered redundant and superfluous. It is a settled canon of statutory interpretation that an entry must be construed in a manner that gives meaning and effect to every word used therein, and avoids any interpretation t....
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....an body for the purpose of repelling insects like mosquitoes; (ii) such substances, intended to affect the structure or any function of the human or animal body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Government by notification in the Official Gazette; and (iii) bulk drugs and formulations; (Emphasis supplied) It is evident from the foregoing discussion that the term "drug" also includes "bulk drugs". In common pharmaceutical parlance, a "bulk drug" refers to a pharmaceutical substance manufactured for use as an Active Pharmaceutical Ingredient (API) in the manufacture of drug formulations. In the present case, the Bulk Drugs proposed to be imported are Active Pharmaceutical Ingredients (APIs). These imported pharmaceutical substances are intended to be used in the manufacture of finished pharmaceutical formulations/dosage forms and in certain cases for purposes such as examination, testing, clinical research, bioavailability or bioequivalence studies. 7.7.7 Further, I observed that the bulk drugs are classified by the applicant under Chapt....
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.... to the standards specified under the Drugs and Cosmetics Act, 1940 and are used as such or as an ingredient in any formulation. A common understanding of the term "Bulk Drug" is that it refers to a pharmaceutical substance manufactured for use as an Active Pharmaceutical Ingredient (API) in the manufacture of pharmaceutical formulations. In the present case, the goods proposed to be imported are Bulk Drugs/Active Pharmaceutical Ingredients. I further find that the Central Drugs Standard Control Organisation (CDSCO) being the regulatory authority concerned with the approval and regulation of drugs in India has granted the relevant approval/licence in respect of the subject goods. 7.7.8 It appears from the above statutory definitions and the documents submitted by the Applicant that the subject goods being Active Pharmaceutical Ingredients (APIs) may fall within the definition of Bulk Drugs where they are intended for use as such or as an ingredient in pharmaceutical formulations and conform to the standards prescribed under the Drugs and Cosmetics. Act, 1940. Further, APIs intended for use as components of pharmaceutical drugs fall within clause (iii) of Section 3(b), subject to....
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....It is a well settled principle of law that a specific entry prevails over a general entry. SI. No. 35 & 36 of Schedule II is a general entry covering goods falling under Chapter 28 & 29 on the basis of their tariff classification whereas SI. No. 226 of Schedule I is a specific description-based entry covering "All Drugs and Medicines." Since the subject goods are bulk drugs/API, the specific entry at:SI. No. 226 is applicable to the subject goods, subject to the exclusion specified therein. 7.8.4 Reliance is placed on the decision of the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), wherein it was held that in case of ambiguity in a taxing provision, the interpretation favourable to the taxpayer must be adopted. The strict interpretation applicable to exemption notifications is distinct from the interpretation of a charging or taxing provision. Since Notification No. 09/2025-Integrated Tax (Rate) is a rate notification prescribing the applicable tax rate and is not an exemption notification, any ambiguity therein ought to be resolved in favour of the Applicant. Accordingly, the benefit of the concess....
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....try (generalia specialibus non derogant). Accordingly, Active Pharmaceutical Ingredients (APIs), though classifiable under Chapters 28 or 29 for tariff purposes, when they satisfy the description of "drugs", are appropriately covered under SI. No. 226 for the purpose of determination of applicable IGST rate. The SI. No. 226 entry is a specific entry which will prevail over the general entry of "all organic chemicals other than gibberellic acid" 7.9 Nature of the Notification 7.9.1 I observe Notification No. 09/2025-Integrated Tax (Rate) is a IGST rate slab notification and not an exemption or concessional duty notification. 7.9.2 I observe that the applicant has placed reliance on the decision of the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), wherein it was held that in case of ambiguity in a taxing statute, and where two interpretations are possible, the interpretation beneficial to the assessee should be adopted. However, in the case of an exemption notification, the same must be construed strictly in favour of the Revenue. I observe that the IGST Notification in question is a taxing no....
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....ed under the said entry, notwithstanding the fact that, on the basis of their individual chemical composition, they may be classifiable under Chapter 28 or Chapter 29 of the Customs Tariff. Further, the fact that such goods are imported in bulk form or as APIs does not, by itself, take them outside the scope of the specific description of "All Drugs and medicines", where their pharmaceutical character and intended medicinal use are established from the documents and regulatory approvals placed on record. 7.10.4 In view of the above discussion, I find that the subject Bulk Drugs/Active Pharmaceutical Ingredients (APIs), as described in the application and supported by the documents submitted by the Applicant, qualify as "Drugs and medicines" for the purpose of SI. No. 226 of Schedule I to Notification No. 09/2025-Integrated Tax (Rate) dated 17.09.2025. Accordingly, the subject goods are eligible for the IGST rate of 5%, provided that the particular Bulk Drug/API is not covered under the exclusion specified in the said entry, including the goods specified at SI. No. 113 of Notification No. 10/2025-Integrated Tax (Rate) dated 17.09.2025. 7.11. In view of the facts and circumstan....