CAAR Mumbai rules bulk drug/API imports qualify as “All Drugs” for 5% IGST

1. Background and context

The Customs Authority for Advance Rulings, Mumbai examined the IGST rate applicable on imports of bulk drugs/Active Pharmaceutical Ingredients (APIs) by M/s Torrent Pharmaceuticals Limited under Notification No. 09/2025-Integrated Tax (Rate) dated 17.09.2025.

The assessee, a pharmaceutical manufacturer, proposed to import various APIs and bulk drugs:

  • Primarily classifiable under Chapter 28 or Chapter 29 of the Customs Tariff (inorganic and organic chemicals);
  • Intended for use in:
    • Manufacture of pharmaceutical formulations (finished dosage forms), and
    • Testing, clinical research, clinical trials, bioavailability and bioequivalence studies.

The assessee requested an advance ruling on whether such imports fall within Sl. No. 226 of Schedule I to Notification No. 09/2025-Integrated Tax (Rate) which prescribes 5% IGST for specified goods, or whether they are instead liable at higher IGST rates applicable to general chemical entries for Chapters 28 and 29.

The core interpretational issue was:
Do bulk drugs/APIs, though classifiable under Chapters 28/29, qualify as “All Drugs and medicines” under Sl. No. 226, which uses the phrase “30 or any Chapter”?

2. Questions before CAAR Mumbai

The assessee sought the following advance rulings:

  1. Whether IGST at 5% is chargeable on import of bulk drugs/APIs in terms of Sl. No. 226 of Schedule I of Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025.
  2. If the answer to Question 1 is in the negative, what is the correct IGST rate on such bulk drugs falling under Chapter 28 or Chapter 29 of the First Schedule to the Customs Tariff Act, 1975.

CAAR ultimately decided Question 1 in favour of the assessee, making Question 2 academic in the facts presented.

3.1 Levy of IGST on imports

CAAR began by referring to Section 3(7) of the Customs Tariff Act, 1975, which provides that any imported article is also subject to IGST at the rate applicable under Section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article supplied domestically.

IGST rates on imports are aligned to the corresponding IGST rate notification applicable to supplies within India. For the relevant period, rates were notified by:

  • Notification No. 09/2025-Integrated Tax (Rate) dated 17.09.2025 (rate notification), and
  • Notification No. 10/2025-Integrated Tax (Rate) dated 17.09.2025 (Nil-rated drugs list).

3.2 Relevant entries for drugs and chemicals

CAAR focused on these key entries:

(a) Concessional 5% entry – Sl. No. 226, Schedule I, Notification No. 09/2025

  1. 30 or any Chapter – All drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs (other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September, 2025)

(b) Nil-rated exclusion – Sl. No. 113, Notification No. 10/2025

  1. 30 or any Chapter – Drugs or medicines listed in Annexure I

Products covered in Annexure I enjoy a Nil IGST rate. The assessee confirmed that the specific bulk drugs/APIs for which ruling was sought are not listed in Annexure I, and CAAR noted that no bulk drug/API referred to in the application was shown to fall within that Annexure.

(c) General entries for chemicals – Schedule II

CAAR also noted that Sl. Nos. 35 and 36 of Schedule II to the 2025 IGST rate notification provide generic coverage for Chapters 28 and 29 at higher rates:

  • Sl. No. 35 – “All inorganic chemicals” under Chapter 28, subject to exclusions in Notification No. 10/2025 or other Schedules.
  • Sl. No. 36 – “All organic chemicals other than gibberellic acid” under Chapter 29.

The choice before CAAR was whether APIs/bulk drugs fall under these generic chemical entries or under the specific drug entry at Sl. No. 226.

4. Factual profile and licensing status of the imports

The assessee is an established pharmaceutical company importing a wide range of bulk drugs/APIs used in:

  • Manufacturing finished pharmaceutical formulations (dosage forms), and
  • Conducting tests, clinical research, clinical trials, bioavailability and bioequivalence studies.

Bulk drugs/APIs are classified under Chapter 28 or 29 based on their chemical nature.