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Nicotine Polacriliex Lozenge, a preparation intended to assist Smoker Quit Smoking attracts 18% GST: AAR [Read Order]

Nicotine Polacriliex Lozenge - GST - Taxscan

The Authority on Advance Rulings (AAR ) in Karnataka ruled that Nicotine Polacriliex Lozenge is rightly classifiable under the heading 38.24. Accordingly, the product is covered under Serial number 97 of Schedule III to Notification No. 01/2017-Central Tax (Rate) dated 28.06,2017 and attracts GST at the rate of 18% (9% CGST, 9% SCST).

The ruling was made by a bench constituted by Sri, Rarish Dharnia and Dr. Ravi Prasad M.P on an application made by M/s Strides Emerging Markets Limited.

The Applicant, a pharmaceutical company, is engaged in the development and manufacture of generic and IP led niche pharmaceutical products. The Applicant developed a new product ‘Narcotic Chewing Tablet” which is used to wean off the withdrawal symptoms associated from the narcotic consumption cessation.  The question on which ruling was sought was regarding the appropriate classification of Nicotine Polacriliex Lozenge (hereinafter referred to as ‘NCT’) manufactured by the Company and rate of tax applicable.

The applicant contends that their product is a medicament and hence is covered under Chapter Heading 30.04. The Applicant argued that the product NPL, consists of Nicotine as primary ingredient And is mixed with various other ingredients to add colour, flavour etc., it provides relief to the patient against tobacco abuse; it safeguards the patient against life harming diseases such as chronic obstructive pulmonary disease, heart disease, diabetes etc.,, and therefore it is a medicament in true sense having therapeutic uses. The applicant also submitted that it is not a gum as it does not leave any residue when consumed and also it is in the form of tablet or lozenge.

The Applicant claims the classification of their product under heading 30.04 and the resultant benefit of entry No. 63 of Schedule-II of Notification No. 01 /2017-Central Tax {Rate) dated 28.06.2017, effective from 01.07.2017.

The Authority ruled that, “It could be seen from above that the instant product supplies only nicotine when administered. The said product is manufactured out of the chemical combination of nicotine and polyacrylic acid. Both ingredients are organic chemicals. Therefore the product is an organic chemical, which is used to supply the nicotine in effect the product being administered is nothing but nicotine in measured doses.”

The Authority further pointed out that even if certain preparations have therapeutic or prophylactic properties still they can be excluded from the scope of the Heading 30.04, as in the case of the aqueous distillates or aqueous solutions of essential oils and preparations.

The Authority also noted that, “the Explanatory Notes, of the Harmonised Commodity Description and Coding System, to the heading 30.04 also specifies the products which are excluded from the heading 30.04. Among these exclusions the last sl.no. (f) Specifies that the Preparations, such as tablets, chewing gum or patches (transdermal systems), intended to assist smokers to stop smoking are excluded from the heading 30.04 and also suggests alternate headings of 21.06 / 38.24.”

Analysing further on whether the relevant product will fall on 21.06 or 38.24, the Authority clarified that Chapter 21 deals with miscellaneous edible preparations and heading 21.06 deals with food preparations not elsewhere specified or included. The instant product basically consists of nicotine which is not an edible / food preparation. Therefore the only alternative left for the. Classification of the instant product is chapter heading 38.24.

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