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TMI Blog2025 (4) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... d services would not qualify for exemption under entry No. 74 of the Notification No. 12/2017-CT(R) dated 28th June 2017 in absence of exemption for specified service accounting code. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 01. FACTS AND CONTENTION - AS PER THE APPLICANT FACTS: 1.1 Epigeneres Biotech Private Limited ('EBPL' or 'Epigeneres' or 'the Company' or 'the Applicant') is an entity incorporated in India having its place of business at B Block, Ikon House, Sun Mill Compound, Senapati Bapat Marg, Lower Parel, Mumbai, Mumbai City, Maharashtra, 400013, India. The Company is registered under GST in the state of Maharashtra vide GSTIN -27AABCU4383J1Z0 and other Indian tax laws (as applicable in India). 1.2. The applicant's business can be bifurcated into two divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation. * The technology to be used by the applicant is a type of DNA/RNA sequencing/amplification, gene expression profiling testing. By using the specified technology, the result on HrC scale marker would be provided by the applicant which could be used as the base for further treatment of the disease. The testing would involve human intervention to read the HrC scale and identification of disease. * The report generated would highlight the chances/ possibilities of cancer in human body for next one-year basis the DNA/ RNA genes in the human body. * The said test will help in detecting if cancer is absent, imminent, or present. 1.6 The lab which is to be set up by the applicant would be at Ikon House, B-Block, Sun Mill Compound, Senapati Bapat Marg, Lower Parel, Mumbai, Pin-400013, Maharashtra, India. 1.7 The brief of technical process from extraction of blood to generation of report is as under: * Blood samples are subjected to RNA extraction using standard protocols. * This RNA is quantitated and then a fixed amount is subjected to qRT-PCR for specific markers. * The results are compared between control and cancer patient. Fold change is suggestive of pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be noted that healthcare services provided by clinical establishment has been exempted under the Notification no. 12/2017-CT(R) dated 28th June 2017 (herein after referred to as 'Exemption Notification'). 2.3. The relevant extract of entry which provides exemption to health care services under the Exemption Notification is as follows: SI.No. Chapter, Section Heading, Group or Service Code (Tariff), Description of Services Rate (%) Condition 74 Heading 9993 Services by way of- (a) health care services by a clinical establishment, an authorised medical practitioner or para medics, NIL NIL 2.4. The term "Health care services" is defined in the said notification vide clause (zg), which is also reproduced hereunder: "(zg) "health care services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury, or trauma. ('Exclusion' to the definition) 2.10. Out of above three limbs, the first limb of the definition is read as "services provided by way of diagnosis or treatment or care for illness ... " seems more relevant to the activities to be performed by the company. With the backdrop of the proposed business of the company, the company humbly makes below submission: a) It may be noted that the word 'by way of diagnosis' as used in the above-mentioned definition has not been defined in GST law. The general interpretation of the term "by way of diagnosis" could be used to construe it to be wide enough to cover any process intrinsically linked or associated with "diagnosis" or which assist in diagnosis. Hence, it is pertinent to note that the phrase "by way of diagnosis" would also include all activities that preludes a complete diagnosis i.e. prognosis. b) The word 'treatment or care for illness' as used in the above-mentioned definition has not been defined in GST law. General interpretation of the term "treatment or care for illness" is wide enough to cover an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot fall under the first category since the applicant is not a hospital, nursing home etc. However, the set up under which the applicant would perform diagnostic services may get qualify under second category since the applicant is working as an independent entity at its premises from where the testing/ laboratory services are undertaken. b) The applicant also bring notice to your good self that they have applied for a licence from National Accreditation Board for Testing and Calibration Laboratories) which is an autonomous body under the aegis of Department of Science and Technology, Government of India which has been authorised as the sole accreditation body for Testing and calibration laboratories. NABL accredits the laboratories that have aligned their quality management system with internationally accepted standards and guidelines i.e., ISO/IEC17025:2005. c) NABL has further categorised into following three fields: i. Testing Laboratories ii. Calibration Laboratories iii. Medical Laboratories d) The sub-category of Medical Laboratories as per NABL includes various disciplines, below are relevant to our case: i. Clinical pathology supports the diagnosis of disease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, ECG, radiometry, pulmonary function test qualify as health care services and a diagnostic centre are clinic establishment. The relevant para of the judgement is reproduced as under: Quote: The diagnostic centres are organized facilities to provide diagnostic procedures such as radiological investigation supervised by a radiologist and clinical laboratory services by laboratory specialists usually performed through referrals from physicians and other health care facilities. Clinical/Medical diagnostic laboratory means a laboratory with one or more of the following; where microbiological, serological, chemical, hematological, immunehematological, immunological, toxicological, cytogenetic, exfoliative cytogenetic, histological, pathological or other examinations are performed of materials/fluids derived from the human body for the purpose of providing information on diagnosis, prognosis, prevention, or treatment of disease. These types of diagnosis or investigations rightly come under the category of health care services and are, therefore, eligible for exemption from GST Unquote: It has been held that the services provided by diagnostic center is a clinical establishment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Human Leukocyte Antigen (HLA) testing services performed by an overseas laboratory outside India on Human Buccal Swabs sent by a nonprofit organisation in India would be exempted from GST as it would be covered under healthcare services by a clinical establishment. The brief summary of the case is provided as below: Quote: The service of HLA typing is to identify the potential donors and is related directly to a transplantation to be done on a future date to a patient requiring such transplant. Analogous to testing of Blood Group, HLA typing identifies the alleles of the donor and these alleles are matched with the alleles of the recipient of transplant. The applicant gets the HLA of the potential donors typed and uploaded to the databases for the doctors to identify the potential donors. Hence the service is to be received only to shortlist the potential donors and increase chances of getting the perfect donors from a big list of potential donors and going through the entire process of testing ab initio and matching between the patient and the donor individually. This testing is sine qua non for any transplantation of an organ not restricted to blood stem cell transplantatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso provide sophisticated and relevant tests by sequencing BRCA 1 & BRCA 2 gene mutation tests and also predict patient risk for ovarian cance. It is pertinent to mention here that the exemption for which the instant application has been filed is Service Specific as well as Service Provider Specific. Thus, to qualify for the said exemption an establishment has to satisfy dual conditions of providing Healthcare Service as well as being a Clinical Establishment. Thus, while the service provided by the Applicant may be Healthcare Service, they do not qualify to be a Clinical Establishment as observed supra. ................................. Having considered the factual position as detailed by the Applicant, we find that the applicant has categorically mentioned that they have collaboration with companies, which in turn are accredited by NABL and DSIR. We find that the Applicant has neither come forward with the names of such companies with which the Applicant claims to have Collaboration, nor have the Applicant produced any document evidencing their own status of accreditation by NABL, which obviously is the sole accreditation body for testing and calibration laboratories. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Code 999316 - Medical laboratory and diagnostic-imaging services - * Service Accounting Group Heading "9993" covers all types of 'Human health & social care Services. * Service Accounting Code "999316", which falls within Group Heading "9993", specifically covers 'Medical Laboratory and Diagnostic-imaging services. * Medical Laboratory and Diagnostic-imaging services have been explained to specifically include 'Analysis and testing services provided by medical laboratories. a) Basis the above, it is pertinent to note that to fall within the ambit of SAC 999316, the service is mandatorily required to be provided by the medical laboratories. The term laboratory has nowhere been defined under the GST law. As per general meaning available on Wikipedia, a medical laboratory or clinical laboratory is a laboratory where tests are carried out on clinical specimens to obtain information about the health of a patient to aid in diagnosis, treatment, and prevention of disease. Clinical Medical laboratories are an example of applied science, as opposed to research laboratories that focus on basic science, such as found in some academic institutions. b) In given case, since the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esearch services in natural sciences, experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application of use in view and experimental development services involving systematic work, drawing on knowledge gained from research and practical experience, that is directed. iv. in biotechnology related to knowledge requiring one or more of the techniques: DNA/RNA like genomics, pharmacogenomics, gene probes, genetic engineering, DNA/RNA sequencing/synthesis/amplification, gene expression profiling, and the use of antisense technology; proteins and other molecules like sequencing/synthesis/engineering of proteins and peptides (including large molecule hormones); proteomics, protein isolation and purification, signalling, identification of cell receptors. a) Here, it is to be noted that the activity to be undertaken by the applicant would also include testing relating to DNA/RNA like genomics, DNA/RNA sequencing/synthesis/amplification in medical sciences which in our view is covered in SAC 998111. b) We hereby draw references to certain definitions: i. As per UNESCO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.22. With the above detailed legal background of classification and relevant notes, the applicant seeks relevant service accounting code for classifying the novel activity which is a non-invasive method to detect early onset of cancer. 2.23. Given the above, the applicant seeks ruling from with respect to services to be rendered by the Applicant to the customers to squarely fall within the scope of aforesaid classification and to qualify in exemption entry no. 74 of Notification No. 12/2017-CT (R). PRAYER: In light of the above, we respectfully pray for the following: * To provide clarification w.r.t applicability of exemption under Exemption Notification (which is available for service accounting code 9993) for proposed diagnostics services to be undertaken by EBPL. * To confirm on the understanding regarding classification of services provided by the applicant as healthcare service. * To confirm if services provided by the applicant would fall in SAC 999316 or 998113. * Personal hearing (incl. virtual) should be granted in order to put forth the contentions and explain the submissions (if required). * Additional information should be allowed to be produced (if re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same shall be provided by a clinical establishment need to be satisfied. 3.4. In this connection it is observed that although in Annexure-4 under Para 12 (d), the applicant have mentioned clinical pathology and molecular testing as their relevant sub-category, which is said to be falling under medical laboratory category; however the copy of specimen Certificate attached by the applicant shows them under 'Testing and calibration laboratories category. Hence, their activity does not appear to qualify within the four corners of "Health care services" to avail the benefit of exemption notification. (ii) Needless to mention that their above said certificate also describes the scope of activity to be 'Development of Cancer Prognostic Diagnostic Technologies. Building & Commercializing Innovative Test'. Therefore, it seems that the proposed activity of the applicant for which exemption is being sought is oriented towards 'Research & development of technology' rather than 'Health care'. (iii) The activity proposed to be carried out by the applicant hints it to be 'Contract research and manufacturing services' whereby they could act as contract research organization (CRO). Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, it is also inter alia observed from literature and other details given under Annex 3 & 4 of the application that they are in talks with investors to raise $200 million to fund large clinical trials, with 10,000-20,000 subjects, in western markets. It is also mentioned under Para 19 (a) of Annexure- 4 ibid that the proposed activity to be undertaken by the applicant would also include testing relating to DNA/RNA like genomics. DNA/RNA sequencing/synthesis/amplification in medical sciences etc., this activity gets appropriately covered under Service accounting code (SAC) 998111. (b) Explanation of SAC CODE 998111 is reproduced hereunder; wherein point 4 is particularly indicative that their service deserves to be classified under this SAC itself: This service code includes basic and applied research services in natural sciences, experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application of use in view and experimental development services involving systematic work, drawing on knowledge gained from research and practical experience, that is directed. 1. to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 06.02.2025. Mr. Aman Gurwada, Senior Vice President, Authorized Representative of the applicant, appeared and made oral and written submissions. Jurisdictional Officer, Mr. Ravikiran C Nirhavane, Superintendent, of CGST appeared. We heard both the sides. 05. OBSERVATIONS AND FINDINGS: 5.1. We have gone through the records of the case and the submissions made by the applicant at the time of filing the application and the submissions made from time to time including the submissions made at the time of the personal hearing. We have also gone through the submissions made by the jurisdictional officer vide letter dated 23.06.2022. 5.2 We find that the applicant in this case, M/s. Epigeneres Biotech Pvt. Ltd., is engaged in providing services in the field of laboratory/testing/diagnostic services. They conduct blood tests which would assist in early detection of cancer. They claim that their diagnosis process/technology is an algorithm-based technology which is operated with the help of next generation sequencing data analysis machines and real time PCR Machines. Next Generation Sequencing (NGS) has been implemented for various tests such as whole genome sequencing, whole exome seq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld qualify for exemption from GST under Entry No.74 of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 and whether the proposed services would get classified under the service accounting code 9993. We find that Sr.no.74 of Notification No. 12/2017 CT (R) dated 26.6.2017 provides exemption to services classified under Heading 9993. It provides exemption from GST to services by way of health care services by a clinical establishment, an authorized medical practitioner or para medics. Clause (zg) of the said notification defines Health care services as under: "(zg) "health care services" means any service by way of diagnosis or treatment of care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma". Further, the term 'Clinical Establishment" is defined in the said notification vide clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devices used to perform tests on samples of blood, urine, tissue etc., to diagnose diseases or monitor health conditions including cancer biomarker tests. Under Medical Devices Rules, 2017, IVDs are classified as medical devices and regulated by CDSCO. Companies manufacturing or importing IVDs must obtain a licence from CDSCO and must comply with quality standards such as ISO 13485. A Medical Device includes any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combinations, including software or an accessory, intended by the manufacturer to be used specifically for human beings or animals for one or more of the specific purposes of diagnosis, prevention, monitoring or alleviation of any disease or disorder. Software used for medical purposes is explicitly ERBE included in the definition. We find that the applicant has not produced any licence or certification from CDSCO for conducting their diagnostic tests nor have they provided any license to function as a Diagnostic Laboratory from CDSCO. They have also not provided copies of any approval from the Indian Council for Medical Research (ICMR) with respect to acceptance of their tests fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dical engineering), cellular fusion, vaccine/immune stimulants, embryo manipulation process biotechnology techniques like bioreactor fermentation, bioprocessing, bioleaching, bio-pulping, bio-sulphurization, bioremediation, biofiltration, and phytoremediation; vi. gene and RNA vectors like gene therapy, viral vectors; vii. bioinformatics; nanobiotechnology We find that the services provided by the applicant is more in the nature of research and experimental development work undertaken in natural science primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application of use in view and experimental development services involving systematic work, drawing on knowledge gained from research and practical experience in the field of biotechnology, gene and RNA vectors like gene therapy, viral vectors etc. The primary activity is research and experimental development of Cancer Prognostic and Diagnostic Technologies. The said services are aptly covered under SAC 998111 and therefore, the applicant is not eligible for the benefit of exemption Notification 12/2017-Central Rate (Tax) dated 28.6.2017. 6. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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