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Concessional Rate is available to End-User Supplier of Scientific Research Goods

The applicant cannot sell their product to their dealers/distributors by charging GST @ 5.00% as per Notification Nos. 45/2017 - C.T.(Rate) and 47/2017 S.T.(Rate), both dated 14.11.2017 because the applicant does not supply goods to end-users who undertake or are engaged in scientific research. The goods are supplied to their distributors only.

MAHARASHTRA AUTHORITY FOR ADVANCE RULING
M/s. EQUITRON MEDICA PRIVATE LIMITED

Description in Brief:
This is regarding the applicability of GST Notification no. 45/2017 & 47/2017 for levying GST at a concessional rate of 5.00 % to some of our customers. We are selling our products through our distributors to whom we invoice the goods at the normal rate of GST @ 18.00%. In turn, the distributors, sell those goods to some notified institutions engaged in the scientific research in the specified areas. The Institutions are being invoiced by our distributors at concessional GST of 5.00%. We wish to sell our products to our distributors at this concessional rate of 5.00% in the first instance itself because the end use of the product sold is exclusively for scientific research. A certificate is obtained from the end-user institution to this effect. 

In Notification 45/2017, Sr. No. 1 in column 4, it is clearly worded as "The goods are supplied to or for-". We will be entitled to invoice our distributor with GST at a concessional rate of 5% if we consider the provision in isolation. However, this wording is not expressly mentioned in Sr. Nos. 2,3, or 4. Our end-user institutions are mainly included in Sr. No. 2. Hence, we seek clarification. 

Contention- As per the Jurisdictional Officer: 
The applicant is selling their products through their distributor's network. Accordingly, they supply the goods under the cover of invoices, to their distributors at the normal rate of GST@18%. These distributors or channel partners are not engaged in scientific research of any, in any manner and doing only the trading. When the distributors sell these goods to institutions engaged in scientific research, they discharge their GST liability @5% whereas the input credit that they are entitled to claim on purchase from applicant is 18% Only. 

It is submitted that Notification No. 47/2017-I.T.(Rate) dated 14.11.2017 exempts goods in column (3) of the Table, from so much of the integrated tax leviable thereon under Section 5 of the said Act, as in excess of the amount calculated at the rate of 5 %, when supplied to the institutions specified in the corresponding entry in column (2) of the Table, subject to the conditions specified in the corresponding entry in column (4) of the said table given in the notification. In respect of Intra State clearances, similar Notification has been issued vide Notification No. 45/20 17-C.T.(Rate) dated 14.11-2017 which exempts goods specified in column (3) of the Table, from the so much of the central tax leviable thereon under Section 9 of the said Act, as in excess of the amount calculated at the rate of 2.5%, when supplied to the institutions specified in the corresponding entry in column (2) of the Table, subject to the condition's specified in the corresponding entry in column (4) of the said table given in the notification. The total tax payable under GST in respect of such clearances effected within the State is 5%. 

In the present case, the applicant is not a direct supplier of the goods for which clarification is sought from this Authority. They are supplying the said goods to their distributors who further supply these goods classified under the Notification No. 45/20 17-Central Tax (Rate) dated 14.11.2017 to Research Organizations @5% of the GST Tax. 

Observation & Finding: 
We find that the applicant supplies subject goods only to their distributors who are involved in further trading of the said goods. The distributors make a further supply of the said goods, also to some notified institution engaged in the scientific research, at a concessional rate of GST @ 5%. It has also been submitted that the end-user institutions, to whom the distributors supply goods are mainly Research Institution, other than hospital, included in Sr. No. 2 of the above-mentioned Notification 45/2017. 

First and foremost, we find that the applicant does do not supply goods to end-users who undertake or are engaged in scientific research. The goods are supplied to their distributors only. The applicant has submitted that the end-user institutions, to whom goods supplied by their distributors, are mainly included in SI-. No. 2 of Notification No.45/2017-C.T.(Rate) dated 14.11.2017. In respect of institutions mentioned at Sr. No, 2, the said notification clearly states that the said institutions should be registered with the government of India in the Department of Scientific and Research, which- (i) produces, at the time of supply, a certificate to the supplier, from the head of Institution, in each case, certifying that the said goods are essential for research purposes and will be used for stated purpose only and that, the said goods shall not be transferred or sold by the institution for a period of five years from the date of installation 

The said notification requires the said certificate to be issued to the supplier, who in the subject case, is the distributor and not the applicant. Thus it is clear that the applicant does not satisfy the conditions of the said Notification No.45/2017, mentioned above. 

Conclusion: 
In view of the above, we hold that the applicant cannot sell their product to their dealers/distributors by charging GST @ 5.00% as per Notification Nos. 45/2017 - C.T.(Rate) and 47/2017 S.T.(Rate), both dated 14.11.2017.