The Karnataka Appellate Authority of Advance Ruling (AAAR) ruled that the micafungin sodium entitled for a concessional rate of 5% GST.
The applicant, Biocon Limited (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 SEZ unit of M/s Biocon, who imports and sells the same, after processing, as bulk drug.
The applicant sells the bulk drug, so purchased, to third party customers, who in turn uses for preparations of injections.
The issues raised in this case was 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 AAR 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 June 28, 2017 and therefore, is not entitled for concessional rate of GST at the rate of 5%.
The Appellant also highlighted the fact that the CDSCO approval in India (which applies to all drug manufacturers) is only for using the Micafungin Sodium as an injection. The said drug cannot be used in any other form other than by way of an injection as it is statutorily not permitted by the Drug Control laws in India.
The Appellant submitted that the lower Authority has erred in ruling that Micafungin Sodium is a raw material for the manufacture of the injection. He submitted that Micafungin Sodium is the only material in the injection which is sold in the form of a salt and that it is mixed with Sodium chloride, an electrolyte only in order to make it suitable for administering intravenously.
The coram of D.P. Nagendra Kumar and M.S. Shrikar, while setting aside the order passed by the AAR ruled that the sale of Micafungin Sodium by the DTA unit of the Appellant is covered under Serial No. 114 of Entry No. 180 of the Rate Notification No 01/2017 IT (R) / CT (R) and therefore, is leviable to GST at the rate of 5%.
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