TaxTMI 
TaxTMI 
2026 (9) TMI 1510
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.... of Schedule-I of the 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. 0392072823 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" in terms of Sl. 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 under Section 28H (2)....
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....f 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 17th 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 to import drugs (excluding tho....
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....re not covered under Annexure I, therefore the same is not applicable in the present case. 4.13 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). 4.14 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 4.15 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. 4.16 As per SI. No. 226 of the Schedule I, drugs and medicines classified under any Chapter fall under its ambit and are subject to levy of IGST @5%. The bulk drugs in question are generally classified under Chapter 28 or 29. It is clear that these ....
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.... 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 gelatine 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) 4.19 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. When even a gelatine capsule is treated as a drug, it goes without saying that the API on account of which the final medicine is effective, too ....
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....ed 14-6-2016 e. C.B.I. & C. Circular No. 44/2018-Cus., dated 13-11-2018 4.23 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" 4.24 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 disease or condition, especially one in liquid form Stedman's Medical Dictionary: * drug. I. Any substance employed as a medicine in ....
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....nch, 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 SI. No. 43 (A) of the above Notification. While the Revenue classified the goods as 'bulk drugs' under SI. No. 43(B), the assessees classified them as lifesaving drugs under SI. No. 43 (A). 'The Tribunal accepted the assessees contention and held that the drugs imported by them were to be categorized under SI. No. 43(A) inasmuch as they found mention in List 2. It was further held that, as SI. No. 43 (A) was more beneficial th....
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....tion 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." 4.31 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. 4.32 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 regard is placed on the Tribunal decision in Aurobindo Pharma Ltd. v. CCE, Hyderabad-I [2009 (247) E.L.T. 206 (Tri. - Bang.)], wherei....
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....hat 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) 4.34 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 4.35 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. 4.36 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. 4.37 Reliance is placed on the Tribunal decision of Hari and Co. v. Collector of Customs, 1991 (53) E.L.T. 336, wherein the semi-colon was interpreted to separ....
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....le 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. 4.42 Reliance is also placed on the decision of Printers (Mysore) Ltd. Vs. Asstt. 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)." 4.43 Therefore, the entry should be interpreted in such a manner that it is not rendered redundant. Accordingly, the term "drugs" should also cover bulk drugs. API for 'testing, clinical research and bio....
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....stered 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;" 4.46 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. 4.47 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 cover the drugs which are intended for such purposes. 4.48 Thus, as long as the product in question is regarded as "Drug"....
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....he 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." 4.53 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 assesses. It is only in the case of an exemption notification that it should be interpreted in favour of the Revenue. IGST ....
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....nder 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 have only considered clause (i) and have not considered clause (iii) (refer para 18 in Sterling Decision and para 11 in Altis d....
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....issionerate The Applicant, in its CAAR-1 applications, has indicated that it intends to import the subject goods under the jurisdiction of the following Customs authorities: (i) the Commissioner of Customs, NS-I, JNCH, Nhava Sheva, Uran, Raigad, Maharashtra-400707; (ii) the Principal Commissioner of Customs, ACC (Import), New Custom House, Near I.G.I. Airport, New Delhi-110037 and (iii) the Commissioner of Customs, Mumbai-III (Import), Air Cargo Complex, Sahar, Andheri (East), Mumbai-400099. The applications were forwarded to the concerned jurisdictional Commissionerate's on 03.07.2026, inviting their comments on the issues raised therein. However, no comments or response were received from any of the concerned jurisdictional authorities. 6. Details of Personal Hearing: A personal hearing in the matter was held on 04.08.2026. During the course of the personal hearing, the learned Advocate appearing on behalf of the Applicant submitted that the goods proposed to be imported are "Bulk Drugs" and sought their treatment as "Drugs" for the purpose of determining the applicable IGST rate under the relevant provisions of the Customs Tariff Act, 1....
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..... The Applicant, while acknowledging that the exemptions considered in those proceedings contained specific lists of drugs, submitted that the underlying principle that bulk drugs are drugs is equally applicable to the present case. 6.2.3 The Applicant accordingly requested that the aforesaid submissions and precedents be taken on record and submitted that the import of bulk drugs/APIs, including those imported for testing, clinical trials, bioequivalence and bioavailability studies, should be eligible for the concessional IGST rate of 5% under SI. No. 226 of Notification No. 9/2025-Integrated Tax (Rate), subject to fulfilment of the other conditions prescribed therein. 7. Discussion and Findings 7.1 I have carefully considered the application filed by the applicant namely, M/s Sun Pharma Laboratories, the submission made by the applicant during the personal hearing and the documents and materials placed on record. 7.2 At the outset, I find that the issue raised in the question in the form CAAR-1 is squarely covered under Section 28H (2) of the Customs Act, 1962, being a matter related applicability of duty (IGST) rate in the present case under the provisions of this Ac....
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....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 pharmaceutical formulation. API are regulated under the provisions of the Drugs and Cosmetics Act, 1940 and the rules made thereunder, and their import is subject to the prescribed statutory requirements and licensing provisions. In support of the nature and regulatory status of the subject goods, the Applicant has submitted copies of the relevant licences issued under the Drugs and Cosmetics Rules, 1945 as detailed below: Form No./ License No. Title of License Issued Illustrative Copy enclosed herewith Form 10 License to import drugs (excluding those specified in Sched....
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....f a drug including empty gelatine 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 disease; and * all substances intended for use as components of a drug. 7.5.3 I observe that Active Pharmaceutical Ingredients (APIs) are substances used as components of a drug. They are regulated under the Drug and Cosmetics Act and require statutory licences for import. 7.5.4 I observe that the bulk drugs are not specifically defined in Drugs and Cosmetics Act, 1940. Therefore, reference is made to the definitions under the Drugs (Price Control) Order, 2013. The relevant extracts are as below: "(b) "active pharmaceutical ingredients or bulk drug" means any pharmaceutical, chemical, biological or plant product including its salts, esters, isomers, analogues and derivatives, conforming to stand....
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.... 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 "clinical trial" makes it evident that the term "drugs" is wide enough to include products intended for use in bioavailability or bioequivalence studies, as well as for clinical trials. Therefore, the mere fact that the API is imported for testing or research purposes, and not for direct therapeutic use, does not, by itself, exclude it from the ambit of "drugs" under the applicable legal framework. 7.6 Judicial Precedents 7.6.1 The Applicant has relied upon various Tribunal decisions wherein it has been held that bulk drugs are also drugs or "drugs" is inclusive of "bulk drugs" including: i. Burroughs Wellcome (I) Ltd. - 2007 (216) E.L.T. 522 (Tri. - Mum.) ii. Cipla Ltd. v. Commissioner of Customs, ....
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.... 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 that would render a part of the provision otiose. 7.7.3 Moreover, the entry applies to goods falling under "Chapter 30 or any Chapter." The deliberate use of the expression "or any Chapter" manifests a clear legislative intent to extend the scope of coverage beyond Chapter 30, thereby encompassing drugs and drug substances classifiable under other Chapters, including Active Pharmaceutical Ingredients (APIs) falling under Chapters 28 and 29. 7.7.4 Reliance is placed on Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), wherein the Supreme Court held that any ambiguity in a taxing provision must be construed in favour of the taxpayer, while the rule of strict interpretation ap....
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....mulations. 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 Chapter 28 or 29 as they are organic and inorganic chemicals. The terms "Bulk drug" and "drug" have not been defined either in the rate notification or in the GST laws. However, the same have been defined in the Drugs (Prince Control) Order, 1995, as amended 2013, which is reproduced below: 2. Definitions: In this Order, unless the context otherwise requires, - (a) "active pharmaceutical ingredients or bulk drug" means any pharmaceutical, chemical, biological or plant product including its salts, esters, isomers, analogues and derivatives, conforming to standards specified in the Drugs and Cosmetics Act, 1940 (23 of 1940), and which is used as such or as an ingredient in any formulations; The definition....
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....utory 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 the applicable statutory requirements. The subject goods proposed to be imported by the Applicant are Active Pharmaceutical Ingredients (APIs) intended for use in the manufacture of pharmaceutical formulations and in certain cases for examination, testing, clinical research, bioavailability or bioequivalence studies. The Applicant has also submitted the relevant statutory licences/approvals issued under the Drugs and Cosmetics regulatory framework in support of the nature and intended use of the subject goods. In view of the above, I find that the subject goods being Bulk Drugs/Active Pharmaceutical Ingredients are covered by the expression "All Drugs and medicines" appearing in Si. No. 226 of Schedule I to Notifica....
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....g 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 concessional rate under SI. No. 226 of Schedule I is admissible to the subject goods. 7.8.5 Further reliance is placed on the Samsung India Electronics Pvt. Ltd. v. Principal Commissioner of Customs [2025 (7) TMI 229 - CESTAT New Delhi] wherein the Tribunal held that a rate notification must be strictly construed, and any ambiguity must be interpreted in favour of the taxpayer and against the Revenue. The relevant excerpt is provided for ease of reference: .. The Principal Commissioner, however, in paragraph 43 of the impugned order considered the IGST Rate Notification as an Exemption Notification and observed that the benefit of the IGST Rate Notification should be interpreted strictly and the burden to prove app....
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....me 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 assesses 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 notification and not an exemption notification. Therefore, applying the ratio laid down in Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), the subject goods of the applicant are appropriately classifiable under SI. No. 226 of Schedule I to Notification No. 09/2025- Integrated Tax (Rate) dated 17.09.2025, which is a IGST taxing entry and not an exemption entry. 7.10 Eligibility of the subject Bulk Drugs/APIs for IGST Rate: 7.10.1 The proposed imports of the subject Bulk Drugs/Active Pharmaceutical Ingredients (APIs) relate to pharmaceutical substances having established medicinal and therapeutic applications. The subject goods are intended to be used as active pharmace....
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.... 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 circumstances, I observe as follow: (a) The definition of "drug" under Section 3(b) of the Drugs and Cosmetics Act, 1940 is wide and inclusive in nature, and expressly covers substances intended for use as components of a drug. Active Pharmaceutical Ingredients (APIs) / bulk drugs, being pharmaceutical substances used as such or as ingredients in formulations, squarely fall within the ambit of the said definition subject to their intended use and compliance with the applicable statutory requirements. (b) The language of SI. No. 226 of Schedule I to Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.202.5 is broad and description-based. It covers "All Drugs and medicines ... " and expressly extends to goods falling....