The procedure for movement of transitional goods lying at the premises of Contract Manufacturers/ Loan Licencee is governed by the provisions under Section 141(1), (2) & (3) of the CGST Act, 2017.
( FAQ 17: DRUGS AND PHARMACEUTICALS)
Whether discounts can be claimed as an abatement from the price for assessing GST
- In terms of Section 15(3) of the CGST Act, 2017, the value of supply for charging GST shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the Invoice issued in respect of such supply.
- The value of supply shall also not include any discount which is given after the supply has been effected, if such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices and ITC attributable to such discount has been reversed by the recipient of the supply.
( FAQ 16: DRUGS AND PHARMACEUTICALS)
What is the transitional credit that can be availed on the existing stocks held by a registered person under GST, who was not required to be registered under the existing law
- In terms of Rule 117(4) of the CGST Rules, 2017 (transitional provisions) read with Section 140(3) of the CGST Act, 2017, a registered person who was not registered under the existing law and who is not in possession of any document evidencing payment of central excise duty in respect of the goods held in stock, shall be allowed credit at the rate of sixty per cent on such goods which attract central tax at the rate of nine per cent or more and forty per cent for the other goods of the central tax applicable on supply of such goods after 01st July 2017 and the said amount shall be credited in the electronic credit ledger after the central tax payable on such supply has been paid.
- In case where integrated tax is paid, the amount of ITC would be at the rate of thirty per cent and twenty per cent respectively of integerated tax.
- This facility is available for a maximum period of 6 months from the appointed day (i.e. upto 31st December, 2017) or till the goods are sold out, whichever is earlier.
( FAQ 8: DRUGS AND PHARMACEUTICALS)
What is the treatment of clearances effected to Special Economic Zones
- The clearances effected to the SEZ are zerorated supplies in terms of Section 16 of the IGST Act,2017.
- Accordingly, the supplier can claim refund of IGST paid on such supplies or clear the same under bond/letter of undertaking and claim refund of the unutilised ITC.
(FAQ 5: DRUGS AND PHARMACEUTICALS)
Whether ISD registration is required to be obtained separately
In terms of second proviso to Rule 8 of the CGST Rules, 2017 read with Section 25 of the GST Act,2017, every person being an Input Service Distributors to make a separate application for registration
(FAQ 7: DRUGS AND PHARMACEUTICALS)
Whether SEZ unit located in a State requires a separate registration under GST
- The SEZ unit located in a State is treated as a business vertical distinct from other units located in the State outside the SEZ [first proviso to Rule 8 of
the CGST Rules, 2017 read with Section 25 of the CGST Act, 2017]. - Hence, separate registration is required to be obtained for the unit located in SEZ.
(FAQ 6: DRUGS AND PHARMACEUTICALS)
How loan and licensee units carry out their operations in GST regime
GST law does not have any special provision for loan and licensee units. Where the contract are in the nature of performance of job-work, these units can opt to follow the procedure laid down in section 143 of the CGST Act, 2017 i.e. the principal can send any inputs etc. to such units without payment of tax and the principal can clear the goods from the premises of such units if the principal declares these units as his additional place of business or where such units are themselves registered under section 25 of CGST Act, 2017.
[FAQ 4: Drugs and Pharmaceuticals]
What is the procedure for movement of time expired medicines from the retail outlets to the manufacturer for destruction
- In such cases, the manufacturer may issue a credit note within the time specified in sub-section (2) of section 34 of the CGST Act, 2017 subject to
the condition that the person returning the expired medicines reduces his ITC. - Subsequently, when the time expired goods are destroyed, the manufacturer
has to reverse his ITC on account of goods being destroyed. - Where the goods are returned after the time limit specified in section 34(2) of the CGST Act, 2017, the registered person returning the goods shall issue a tax invoice, as it is a supply within the meaning of Section 7 of the CGST Act, 2017.
FAQ3: Drugs and Pharmaceuticals
Comments: But a retail outlet can not issue a tax invoice to wholesale under Drugs and Medicines Act.
What are the requirements for clearance of physician samples distributed free of cost?
In case of clearance of physician samples distributed free of cost, the ITC availed on the said samples has to be reversed in view of the provisions under Section 17(5)(h) of the CGST Act, 2017.No tax is payable on clearance of physician samples distributed free of cost as the value of supply is zero and no credit has been availed.
[FAQ 2 on Drugs and Pharmaceuticals]
Whether formulations cleared have to be assessed to GST under transfer price mechanism or on the basis of MRP printed on them
The assessment of drugs and formulations under GST would be on the basis of transaction value at each level of supply with end to end ITC chain for neutralizing the GST paid at the procurement level.
FAQ1: Drugs & Pharmaceuticals