The Karnataka Authority of Advance Ruling (AAR) ruled that the concession rate of 5% of Goods and Service Tax (GST) is not applicable to the sale of Micafungin Sodium where the product is used as raw material to produce other goods. The AAR bench further clarified that as per the relevant statute and notifications, the GST exemption would be available only if the product supplied dis ready for administering by way of injection.
The applicant (DTA unit) is engaged in the manufacture of generic active pharmaceutical ingredients (APIs), novel biologics, biosimilar insulins, and antibodies. The applicant purchases “Micafungin Sodium” from the Special Economic Zone (SEZ) unit of M/s Biocon, who imports and sells the same, after processing, as a bulk drug. The applicant sells the bulk drug, so purchased, to third party customers, who in turn uses for preparations of injections.
The applicant sought for an advance ruling on the issue whether the sale of Micafungin sodium by the DTA unit of the applicant is covered under Serial No. 114 of Entry No. 180 of the Notification No. 1/2017 Central Tax (Rate) dated June 28, 2017, and therefore, is leviable to GST at the rate of 5%.
The applicant contended that the product is classified under tariff heading 2941 9090 being the drug or medicine, falls hinder SI No.114 of the List I pertains to Entry No. 180 of Schedule I of GST the notification supra, the product is leviable to and accordingly they are discharging IGST 5% to procure the said product and supplying the same on charging 5% GST, to the customers, who use the said product for injection.
The authority consisting of the members Dr. Ravi Prasad and Mashhoodur Rehman Farooqui ruled that The sale of Micafungin sodium by the DTA unit of the applicant is not covered under Serial No. 114 of Entry No. 180 of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and therefore, is not entitled to concessional rate of GST at the rate of 5%.
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