IGST Not Leviable On Clinical Observation Studies Provided To Foreign Recipients: Karnataka High Court

The Karnataka High Court held that IGST (Integrated Goods and Services Tax) is not leviable on clinic observation studies for foreign recipients, as such services qualify as export of services with the recipient located outside India. Justice S.R. Krishna Kumar stated that having regard to the specific observations made in the 37th GST Council Meeting, whereby it was resolved to clarify the tax liability in GST liability in relation to foreign recipients for R & D services provided by Indian pharmaceutical companies, the impugned notification dated 30.09.2019 is clearly retrospective, being clarificatory and elucidatory in nature. In this case, the assessee/petitioner conducted clinical observation studies pursuant to a tripartite agreement entered into with the New York School of Medicine, Administrative Unit of New York University, New York and its associated company at USA. The assessee contended that it was engaged in conducting clinical trials, which would amount to the export of services. Since the recipient of services was located outside India, the place of supply was governed by Section 13(2) of the IGST Act and Section 13(3)(a) of the IGST Act was not applicable. The assessee further argued that in view of the Notification No.04/2019 - Integrated Tax dated 30.09.2019, the services provided by the assessee were not liable to IGST. The adjudicating authority held that Notification No.04/2019 - Integrated Tax dated 30.09.2019 was prospective in nature and application and was not retrospective. The bench noted that the place of recipient of the services provided by the assessee is in the USA, which is outside the territory of India and in a non-taxable territory and consequently, by virtue of the aforesaid notification, the assessee could not have been saddled with the liability to pay GST. The bench found that the 37th GST Council Meeting recommended issuing a notification under Section 13(13) of the IGST Act to notify that the place of supply of specific R & D services, when provided by Indian pharmaceutical companies to foreign service recipients, such place of the recipients shall be the place of effective use and enjoyment of the service. The bench stated that the department clearly fell in error in concluding that the said notification is prospective and not retrospective, and would not be applicable for the period prior to 30.09.2019. The bench observed that if the notification dated 30.09.2019 is held to be construed and treated to be retrospective in nature, application and operation, the assessee would be entitled to the benefit of the said notification and cannot be saddled with the liability to pay GST, as wrongly demanded by the department. The bench referred to the case of Suchitra Components Ltd. v. Commissioner of Central Excise, Guntur reported in (2006) 12 SCC 452, where the Supreme Court has come to the conclusion that apart from amendments to statutory provisions, which are clarificatory and elucidatory, are retrospective, even circulars, notifications, etc., which are clarificatory and elucidatory, are also retrospective in nature. In view of the above, the bench allowed the petition. Case Title: M/s Iprocess Clinical Marketing Pvt. Ltd. v. Asst. Commissioner of Commercial Taxes Case Number: WRIT PETITION NO. 10989 OF 2025 Counsel for Petitioner/Assessee: Vikram Huilgol Counsel for Respondent/Department: K. Hema Kumar Click Here To Read/Download Order

IGST Not Leviable On Clinical Observation Studies Provided To Foreign Recipients: Karnataka High Court

Mehak Dhiman

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