TaxTMI 
TaxTMI 
2026 (9) TMI 1509
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....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. 0313054631 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 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 under Section 28H (2). The relevan....
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....n 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 those specified ....
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....T @ 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 bulk drugs, even if not classified under Chapter 30, still fall under the ambit of the entry as it is applicable to drugs and medicines of any Chapter. Th....
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....nsects 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 is nothing but a drug. 4.20 Furthermore, under the Drugs and Cosmetics Act and Rules, for import of a bulk drug, the importer needs to procedure numero....
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....can 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 the treatment of disease. 4.25 Thus, it is clear that the term "drugs" generally includes all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings; and also include substances intended for use as components of a drug. Therefore, it is submitted that bulk drugs such as active pharmaceutical ingredients also fall under the ambit of drugs only. Even as per judicial precedents, the term "drugs" is inclusive of bulk drugs 4.26 It is submitted that there is plethora of decisions that hold that....
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....3 (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 than 43 (B), the assessee was not precluded from claiming such benefit at a later stage. It is settled law that, where two exemption Notifications are applicable to a given goods which is otherwise chargeable to duty, the assessee is entitled to avail the benefit of that Notification which is more beneficial vide Indian Oil Corporation Ltd. v. CCE - 1991 (53) 347 (Tribunal), CCE v. Indian Petrochemicals - 1997 (92) E.L.T. 13 (S.C.) and H.C.L. Ltd. v. CC - 2001 (130) E.L.T. 405 (S.C.). Applying the same principle, we hold the view that, if two entries in an Exemption Notification....
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....e 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.)], wherein it was held that when the notification does not distinguish between bulk drugs, drugs or medicines, then exemption is to be granted is to bulk drugs as well. 4.33 Further, reference is also made to the recent decision of the Hon'ble CESTAT, Ahmedabad in the case of Shri Baser v. CCEx & St - 2024 (12) TMI 270 wherein reliance was placed on the decisions of Cipla Ltd (supra) and Hetero Drugs Ltd. v. CC (Airport) - 2017 (9) TMI 1275- CESTAT Chennai to hold that drugs and bulk drugs are one and the same. Thus, the exemption benefit under SI. No. 108(A) of Notification No.....
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....he 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 separate the former group from the latter group. The decision was maintained by the Supreme Court in Collector of Customs v. Hari and Co., 1997 (96) E.L.T. 503 (S.C.). Reference is also made to the Tribunal's decision in Heildelberg Cement (India) Ltd. v. Commr. of C. Ex., Nagpur & Raigad, 2015 (315) E.L.T. 53 (Tri. - Mumbai), wherein it was held clauses separated by a semi-colon are to be read disjunctively and not conjunctively. 4.38 From the fact that (d) "formulations manufactured from bulk drugs", are mentioned separately, it can be inferred that (a) "all drugs and medi....
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....e 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 bioequivalence study' also fall under the ambit of 'drugs' and are leviable with IGST @5% 4.44 The relevant definitions from the Drugs and Cosmetic Rules, 1945 are extracted below: b) "drug" includes -- (i) 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 s....
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....t 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" by the CDSCO, irrespective of whether it is for manufacture of medicines, or for clinical trials, it must be considered to be eligible to avail benefit of SI. No. 226 of Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025. The bulk drugs classified under Chapter 28 or Chapter 29 are still rightly subject to levy under Sl. No. 226 of Schedule I, and not under Sl. No. 35 or 36 of Schedule II to the IGST Rate Notification. In case of any ambiguity in the IGST Rate Notification, it should be interpreted in favour of the taxpayer 4.49 SI. No. 35 and 36 of Schedule....
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.... 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 Notification is a taxing statute and not an exemption notification. Thus, even on applying the decision of Dilip Kumar the interpretation should be in favour of the Applicant. Few Advance Rulings on this issue Customs Advance Ruling issued to CIPLA on identical issue 4.54 Ruling CAAR/Mum/ARC/161,162/2025-26 dated 17.03.2026 was issued to Cipla Limited, by CAAR, Mumbai (Enclosed as 'Exhibit - C'). This Ruling squarely covers the issue at hand and in the context of Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025 has clearly held that benefit of 5%....
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....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 decision) Furthermore, the rulings have failed to take into consideration the previous decisions and rulings on the interpretation wherein "Drugs" was time and again held to include bulk drugs. 4. In Re: M/s. Altis Finechem Pvt. Ltd. 2021 (1) TMI 564 - AAR, Guj. ADVANCE RULING NO. GUJ/GAAR/R/61/2020 4.57 The above Rulings are not pertaining to the present legal position. Thus, they are not strictly applicable to the present Application. However, in the interest of completion of information, the above Rulings have been highlighted to the Hon'ble Authority. 4.58 A....
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....ctional 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, 1975 and the Integrated Goods and Services Tax Act, 2017. The Applicant sought a ruling as to whether the subject Bulk Drugs are covered within the scope of SI. No. 226 of Schedule I to Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025, which covers "all drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs", subject to the exclusions specified therein. The Applicant relied upon the definition of "drug" under Section 3(b) of the Drugs and Cosmetics Act, 1940, as well as the definition of "bulk drug"....
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....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 Act. The question posed for advance ruling is: 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? 7.3. Statutory Framework 7.3.1. In terms of Section 3(7) of the Customs T....
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....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 Schedule X) to the Drugs and Cosmetics Rules, 1945 License No. IL/BD-016855 RC/BD-002884 dated 17.04.2026 Form CT-17 License to Import New Drug or Investigational New Drug for the purpose of Clinical Trials or Bioavailability or Bioequivalence study or for examination, test and analysis Licence No. SW/SND/CT- 17/2024/00000765 dated 24.12.2024 7.4.3. Further, the applicant has submitted that there is no dispute regarding tariff classification under Chapters 28 or 29. Also, the issue raised in the present application is not regarding classification of the subject ....
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....equire 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 standards specified in the Drugs and Cosmetics Act, 1940 (23 of 1940) and which is used as such or as an ingredient in any formulation; *** "(i) "formulation" means a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include- (i) any medicine included in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines; (ii) any medicine included in the Homeopathic system of medicine; and (iii) any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do no....
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....r 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, Chennai - 2007 (218) E.L.T. 547 (Tri. - Chennai) iii. Astrix Laboratories Ltd. - 2009 (233) E.L.T. 372 (Tri. - Bang.) iv. Further, in Aurobindo Pharma Ltd. - 2009 (247) E.L.T. 206 (Tri. - Bang.), it was held that where a notification does not distinguish between "drugs" and "bulk drugs", such distinction cannot be artificially introduced. These decisions consistently held that bulk drugs are also drugs, particularly where the exemption/benefit entry uses the expression "drugs" without exclusion. 7.6.2. Advance ruling decisions: (i) I observe that in CAAR/Mum/ARC/161,162/2025-26 dated 17.03.2026 was issued to Cipla Limited, by CAAR, Mumbai. This Ruling squarely covers the....
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....cope 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 applies only to exemption notifications. Since Notification No. 09/2025-Integrated Tax (Rate) is a taxing notification, any ambiguity therein must be interpreted in favour of the Applicant. 7.7.5. It is submitted by the applicant that there is plethora of decisions that hold that the term "drugs" is inclusive of "bulk drugs". The Tribunal in Burroughs Wellcome (I) Ltd vs Commissioner of C. Ex. and Cus., Mumbai [2007 (216) E.L.T. 522 (Tri-Mum)], in the context of exemption benefit for life saving drugs, held that the phrase can include bulk drugs as well. The Tribunal observed that the term life saving drugs was not defined in the exemption notification, but upon the term of "drugs" under the Drugs (....
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....r, 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 of 'drug' has been defined in The Drugs and Cosmetics Act, 1940, (23 of 1940) and the same is reproduced below; 3. Definitions. - In this Act, unless there is anything repugned in the subject or context, - (b) "drug" Includes - (i) 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....
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....r 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 Notification No. 9/2025-Integrated Tax (Rate) dated 17 September 2025 subject to the exclusion specified therein. Accordingly, the subject goods are eligible for the IGST rate prescribed under the said entry provided that they are not covered under SI. No. 113 of Notification No. 10/2025- Integrated Tax (Rate) dated 17th September, 2025. 7.8. Specific Entry Vis-à-vis General Entry: The subject bulk drugs/APIs proposed to be imported are stated by the applicant to be classifiable under Chapter 28 or 29 are rightly covered under SI. No. 226 of Schedule I and not under SI. No. 35 or 36 respectively of Schedule II of the Notification No. 9/2025-Integrated Tax (Rate). 7.8.1. Sl. No. 35 & 36 of th....
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....lhi] 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 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 ... (emphasis supplied) Since the subject products satisfy the statutory and functional requirements applicable to Bulk Drugs/Active Pharmaceutical Ingredients....
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.... 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 pharmaceutical ingredients in the manufacture of pharmaceutical formulations and in certain cases for examination, testing, clinical research, bioavailability or bioequivalence studies. Thus, the subject goods possess the character of Bulk Drugs/APIs and are regulated as pharmaceutical substances. 7.10.2 Under Section 3(b) of the Drugs and Cosmetics Act, 1940, the definition of "drug" includes medicines and substances intended for use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as well as substances intended for use as components of a drug. Accordingly, Bulk Drugs/APIs intended for use as active ingredients in pharmaceutical formul....
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.... 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 under "Chapter 30 or any Chapter". Therefore, the said entry is not restricted merely to finished pharmaceutical formulations falling under Chapter 30. Bulk Drugs/APIs having the character and intended use of drugs and medicines may accordingly fall within the scope of the said entry, notwithstanding their classification under Chapter 28 or Chapter 29 of the Customs Tariff. (c) The evidence on record, including the statutory licences/approvals and other documents submitted by the Applicant establishes that the subject goods are Bulk Drugs/Active Pharmaceutical Ingredients (APIs) intended for use in the manufacture of pharmaceutical formulations and, in certain cases, for exami....