AAR Bars ITC on Clinical Trial Imports, Says Free Drugs Are Not Business Supply [Read Order]

The article summarises an AAR order which addressed whether input tax credit (ITC) is claimable on drugs imported for use in clinical trials that are distributed free of charge to trial subjects. The Authority examined whether supplying free drugs in a clinical trial context constitutes a “supply” in the course or furtherance of business and whether such activity creates an entitlement to claim ITC on associated imports. The AAR held that free distribution to trial participants does not amount to business supply that generates consideration, and therefore ITC on such imports cannot be allowed. The ruling parses commercial intent, the presence or absence of consideration, and the nexus between import activity and taxable business operations; it holds practical consequences for pharma companies, contract research organisations and importers engaged in clinical research with respect to tax recovery, input allocation and compliance.