The Tamil Nadu Bench of the Authority for Advance Rulings ( AAR ) has ruled that Goods and Services Tax ( GST ) Exemption Notification 04/2019 is not applicable for services of research and development supplied in relation to the ‘Agro-Chemical’ Sector.
The authority bench clarified that the place of supply remains under Section 13(3) of the IGST Act, 2017, making these services taxable.
The Central Government’s Notification No. 04/2019 Integrated Tax clearly specifies that the place of supply is the location of the service recipient, but this only pertains to research and development services related to the pharmaceutical sector. The fact that the applicant, International Institute of Biotechnology and Toxicology (IIBAT), can perform pharmaceutical services and is recognized by the National Good Laboratory Practice (GLP) Compliance Monitoring Authority (NGCMA) does not extend the exemption to services rendered to the agro-chemical sector.
IIBAT, a society registered under the Tamil Nadu Societies Registration Act, 1975, focuses on scientific research, non-clinical health, and environmental safety studies.
Despite their globally accredited testing services, the applicant has been charging 18% GST on services supplied to sponsors outside India, believing the place of supply is within India under Section 13(3) of the Integrated GST Act, 2017. They receive payments in convertible foreign exchange and argue that the effective use of their services is outside India.
The authority stated that Notification No. 04/2019 Integrated Tax, dated September 30, 2019, is specific to the pharmaceutical sector. It does not cover research and development services supplied to the agro-chemical sector under agreements with foreign service recipients. There are no provisions to include the agro-chemical sector within the scope of this notification.
However, IIBAT’s contention that they meet the conditions of Notification No. 04/2019 Integrated Tax for services provided outside India does not hold for the agro-chemical sector.
The authority bench observed that the notification’s language is clear and unambiguous, applying only to pharmaceutical research and development services.
Consequently, IIBAT’s services to the agro-chemical sector remain taxable, and they must continue charging GST at applicable rates.
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