Clarification on Rate of IGST on all Reagents Under Heading 3822

Posted by Parth Shah
Blog originally posted on 21/09/2021 02:54 PM

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The rate of IGST levied on import and supply of non-diagnostic reagents classified under heading 3822 was litigative. GST council has recently clarified that all laboratory reagents and other goods falling under heading 3822 shall be liable to IGST rate of 12%. 

Background:

  • There has been a lot of controversy revolving around the taxability of reagents falling under Entry No. 80 of Schedule II of the GST Rate Notification, which prescribed the rate of tax on ‘all diagnostic kits and reagents’ to be 12%.
  • Per the Fitment Committee’s 2017 Report and decision of various Advance Ruling and Appellate Advance Ruling Authorities, rate of 12% is applicable to both diagnostic and laboratory reagent.
  • However, authorities took a view that concessional rate of 12% was available only to diagnostic reagent and thereby all non-diagnostic reagents is liable to 18% IGST.

GST Council’s Clarification:

  • GST Council in its 45th meeting held on 17 September 2021 has clarified that all laboratory reagents and other goods falling under heading 3822 would be taxed at 12%.

Tradewin Comments:

  • The Press Release has given a much-awaited clarification on applicability rate of IGST on reagents classifiable under heading 3822.
  • Since the press release is clarificatory is nature, in our view, same should have a retrospective effect. In this contest, reference can be made to the Supreme Court ruling in cases of CCE vs Mysore Electricals Industries Limited wherein it was held that a beneficial circular has to be applied retrospectively. Said view has been followed by other Supreme Court rulings as well.
  • Accordingly, for all the future shipments, all reagents classifiable under heading 3822 should be allowed to be cleared at 12% IGST. For the past shipments following could be the way forward:
    IGST @ 18% paid under protest and matter is litigated
    • Importer should make an additional submission before the authority, highlighting the clarification in the press release
    • File a refund for such excess IGST paid under protest
  • IGST @ 18% paid and entire credit is claimed
    •  Given that credit has already been claimed, importer would not be entitled to claim refund of such IGST

Please reach out to our team of international trade & indirect tax professionals if you have any queries regarding these developments

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Topics: Tradewin, Customs

Blog originally posted on 21/09/2021 02:54 PM

Parth Shah

Written by Parth Shah

Parth has a bachelor's degree in Commerce from St. Xavier’s College, Kolkata and is a qualified Chartered Accountant with more than 9 years of experience post qualification. Prior to joining Tradewin India, Parth has worked with Big 4 consulting firms. He has rich experience in assisting clients on various strategic and statutory issues including realignment of supply chain to optimize tax impact, guiding through assessments, providing litigation support, HS Classification & Customs Valuation, Customs and Trade Health Checks, etc. Parth has led various projects relating to implementation of GST in India, obtaining export benefits etc. for several large MNCs. Parth has authored a book on Central Excise and Service Tax and has made several editorial contributions to online and print media. He is also a regular speaker in indirect tax conferences.