12% GST on Pharmaceutical Pellets, and Granules except Orlistat Pellet: AAR [Read Order]

The Telangana Authority of Advance Ruling (AAR) has ruled that as obesity is not a disease, 12% GST payable on pharmaceutical pellets, and granules except Orlistat Pellet.

The applicant has a manufacturing license for manufacturing sale of pharmaceutical pellets and granules for treatment of various ailments. It has been submitted that these pellets and granules are at a pre stage and ready to be filled into capsules compressed into tablets. These are not in measured doses which can be sold in retail markets. The applicant has been paying 18% tax on these goods under CGST & SGST and the applicant is of the opinion that they have to pay 12%.

The applicant has sought the advance ruling on the issue whether the pharmaceutical Pellets and Granules manufactured by the applicant can be classified as Medicaments under Sl.No.62 of Schedule II of the Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 and subject to GST at the rate of 12%. The AAR has observed that obesity is not a disease and hence reduction of weight cannot be seen as a treatment against a disease, therefore except the Orlistat which does not fit into the definition of medicaments, pharmaceutical Pellets and Granules are liable to be taxed at the rate of 12%.

Relying on the decision of the Supreme Court in the case of Commissioner of Central Excise Vs Wockhardt Life Sciences Ltd, a bench comprising B. Raghu Kiran (Central Tax) and S.V. Kasi Visweswara Rao (State Tax) held that 'therapeutic or prophylactic' would apply to substances used, "to prevent, to guard against it, before, in medicine, preventive protecting against disease; guarding against disease, a preventive of disease; a condom; preventive treatment against disease and; Serving to cure or heal, Curative concerned in discovering and applying remedies for disease."

After analysing the arguments, the bench held that “Obesity is not a disease and hence reduction of weight cannot be seen as a treatment against a disease. Therefore except the product Orlistat which does not fit into the above definition, others fall under medicaments used in therapeutic or prophylactic applications.”

 To Read the full text of the Order CLICK HERE

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