Clinical Trial Services to Foreign Clients Qualify as Export of Services: Karnataka HC Quashes GST Demand [Read Order]

In a recent ruling, the Karnataka High Court held that clinical trial services provided by an Indian company to foreign clients qualify as export of services and cannot be subjected to GST and accordingly quashed the GST demand raised by the tax authorities.

IProcess Clinical Marketing Private Limited, the petitioner, filed a writ petition before the Karnataka High Court challenging an adjudication order dated 28 March 2024 and an appellate order dated 25 February 2025 passed under the GSTlaw.

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The dispute related to the tax period from April 2018 to March 2019, during which the petitioner had provided clinical trials and related pharmaceutical research services to foreign entities, including recipients based in the United States.

The GST authorities had treated these services as taxable domestic supplies and raised a GST demand against the petitioner. The appellate authority upheld the demand on the ground that Notification No. 04/2019-Integrated Tax dated 30 September 2019, which clarified the place of supply for certain R&D and clinical trial services, was prospective in nature and could not be applied to the earlier period.

Before the High Court, the petitioner’s counsel argued that the services provided were like clinical trials conducted for foreign recipients and that the place of supply should be determined under Section 13(2) of the IGST Act, which fixes the place of supply as the location of the service recipient.

The counsel argued that Section 13(3)(a) was wrongly applied, as the services did not involve goods being made physically available in the manner contemplated under that provision. They also argued that the notification issued in 2019 was clarificatory and flowed from the recommendations of the 37th GST Council Meeting.

The State authorities opposed the petition and argued that the notification was prospective and that the services were performed in India, making them taxable under GST for the relevant period.

After hearing both sides, Justice S.R. Krishna Kumar observed that the records clearly showed that the recipient of the services was located outside India. The court observed that Notification No. 04/2019-Integrated Tax specifically clarified that the place of supply for pharmaceutical R&D services, including clinical trials, would be the location of the service recipient.

The court explained that the notification was issued to remove ambiguity following the recommendations of the GST Council and was clarificatory in nature. The Court pointed out that such clarificatory notifications are required to be applied retrospectively.

In view of this position, the court set aside both the adjudication order and the appellate order and held that the petitioner was not liable to pay GST on the clinical trial services provided to foreign clients. The writ petition was allowed.

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