The Authority For Advance Ruling, Tamil Nadu ruled that the GST exemption notification is not applicable on research and development services provided to Agro-Chemical Sector.
The bench opined that the place of supply continues to be covered under Section 13(3) of the IGST Act, 2017 and are accordingly taxable. Further the provisions of Notification No. 04/2019 Integrated Tax, dated 30th September 2010 arc applicable to research and development services related to ‘Pharmaceutical sector only and shall not be applicable on the services supplied by the applicant, in terms of the agreements entered into with the foreign Service recipients, as there are no provisions to include or consider ‘Agro-chemical sector within the ambit of the impugned notification.
The Notification No. 0 4 / 2 0 1 9 – Integrated Tax, issued dated 30m September 2019 shall not be applicable on the services supplied by the applicant, i.e., research and development services provided in relation to ‘Agro-chemical sector.
Read More: PCIT To Apply Mind Before Sanctioning Income Tax Reassessment: Bombay High Court
The Central Government by Notification No. 04/2019 – Integrated Tax, with clear and unambiguous language notified that the place of supply will be the location of the recipient of service. only in respect of the supply of research and development services related to the pharmaceutical Sector. Merely for the reason that the Applicant claims to be capable of undertaking/ performing services in relation to pharmaceuticals Sector and that they are recognized by NGCMA, would not be sufficient to cover the services rendered by them in relation to Agrochemical sector, so as ot fall within the scope of the said exemption Notification.
In this regard, it is important to take note of the fact that the Applicant admittedly have filed GLP Application themselves dated 29.12.2023 before the National Good Laboratory Practice (GLP) Compliance Monitoring Authority for Pharmaceutical Services, to get their test items under tie Pharmaceutical sector to be incorporated under GLP Certification.
Issue Raised
Whether Notification No. 04/2019 -Integrated Tax, issued dated 30 September 2019 shall be applicable on the services supplied by the applicant, i.e., research and development services provided in relation to agro-chemical sector.
Facts
International Institute of Biotechnology and Toxicology (TIBAT) is a Society registered under the Tamil Nadu Societies Registration Act, 1975. The Applicant carries on its activities as per its Aims and Objectives by ‘Serving Society through Science’. The main object of the Society is to carry out research under laboratory and field conditions, non- clinical health and environmental safety studies among others.
IIBAT is a globally accredited testing organization which performs testing in compliance with the global good laboratory practices (GLP). Applicant undertakes testing for the products of their clients (hereinafter referred to as ‘sponsors), and the applicant provides the results in the form of a report. Applicant has a standard practice to execute an agreement/document with the sponsors).
The applicant has been supplying the above services to its sponsors outside India under tax invoice with 18% GST as the applicant’s understanding was that the place of supply for such services falls in India under Section 13(3) of the IGST Act 2017. However, the Applicant receives the consideration in convertible foreign exchange for providing these services to sponsors outside India. Further, the place of effective use and enjoyment of the above services is purely in the hands of service recipients who are located outside India.
The applicant contended that it fulfil the conditions as stated in the Notification No. 04/2019 -Integrated Tax with respect to the supply of services made outside India and all the services provided by the applicant fall under the categories listed out in the Notification. However, the applicant continued to charge GST on such services at the rate of 18% and has deposited the amount with the Government.
Case Information
Case Name: M/s. International Institute of BioTechnology and Toxicology
Judicial Level & Location : AAR, Tamil Nadu
Appeal Number : Order No. 14/ARA/2024
Date of Ruling : 11/07/2024
Ruling in favor of: Department
Judges: Smt. D Jayapriya, I.R.S., Member CGST and Smt. A. Valli, M.Sc., Member SGST
