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In India, a foreign sponsor does not automatically make clinical-trial services an export. An Indian supplier must meet all five conditions in the IGST Act’s export-of-services definition, including that the place of supply is outside India. A 2019 Maharashtra advance ruling treated the particular clinical research arrangement before it as performed in India and therefore not an export. A domestic sponsor cannot meet the requirement that the recipient be outside India, so the export route is unavailable; the domestic GST treatment must be determined separately.
Does a foreign sponsor make clinical research an export of services?
No, not by itself. Under Section 2(6) of India’s IGST Act, a service is an export only when all of the following conditions are met:
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- The supplier of the service is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in Indian rupees wherever the Reserve Bank of India permits it.
- The supplier and recipient are not merely establishments of a distinct person under the statutory explanation.
CBIC’s Sectoral FAQs set out these conditions. A foreign sponsor’s address or a payment in foreign currency cannot substitute for the other requirements. In particular, the place-of-supply analysis depends on the actual service and arrangement, not just where the sponsor is based.
How did the Maharashtra ruling treat an overseas sponsor?
Cliantha Research Limited: the facts and outcome
In its order dated 4 May 2019, the Maharashtra Authority for Advance Ruling considered clinical research and support services that Cliantha Research Limited proposed to provide from Maharashtra to entities in India and abroad. In the arrangement described, the overseas sponsor made investigational goods physically available to the Indian supplier, and the research services were performed in India.
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The authority applied IGST Act Section 13(3)(a), treated the place of supply as India, and concluded that the described services did not qualify as exports under Section 2(6). Because the supplier’s location and the place of supply were both in Maharashtra in that case, it found CGST and Maharashtra SGST payable.
Why the ruling is not a blanket rule
The order addresses Cliantha’s described arrangement, not every clinical trial or every contract with a foreign sponsor. The relevant facts include whether the sponsor makes goods physically available to the supplier, what work the supplier performs and where, and which place-of-supply provision applies to that particular service. A different scope of work or supply arrangement may require a different analysis.
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How does the treatment differ for domestic and overseas sponsors?
| Question | Overseas sponsor | Domestic sponsor |
|---|---|---|
| Does recipient location meet the export condition? | Potentially. The recipient must be located outside India; that alone does not establish an export. | No. An Indian recipient does not meet the recipient-outside-India condition, so the export-of-services route is unavailable. |
| Does sponsor location determine place of supply? | No. Determine place of supply under the rule applicable to the actual service and facts. In Cliantha’s 4 May 2019 Maharashtra AAR case, sponsor-provided investigational goods were physically made available and the work was performed in India; the authority applied Section 13(3)(a). | No. The applicable place-of-supply rule and the locations of supplier and recipient still matter for domestic tax treatment. |
| What if the sponsor supplies goods to the CRO? | That fact was material to the Cliantha ruling because the goods were physically made available to the Indian supplier. Assess whether the same statutory rule applies to the contract in question. | Assess the actual contract and work; domestic recipient status alone does not settle the place of supply or tax type. |
| Could the supply be zero-rated as an export? | Only if all five Section 2(6) conditions are met. CBIC describes export routes that include supply under a bond or letter of undertaking with an eligible input-tax-credit refund claim, or payment of integrated tax with a refund claim, subject to applicable requirements. | No export-of-services treatment, because the recipient is in India. Determine the applicable domestic GST treatment instead. |
| Which GST is payable? | It depends on whether the supply qualifies as an export and on the applicable place-of-supply and location rules. In Cliantha, CGST and Maharashtra SGST applied to the described same-state arrangement. | Determine whether CGST plus the relevant SGST, or IGST, applies using the supplier’s location, recipient’s location, place of supply, and classification. |
What rate may apply to clinical-trial services?
CBIC’s GST rates schedule lists research and development services under heading 9981 at 9% central tax plus 9% state tax, or 18% integrated tax, as applicable. This is the schedule entry for R&D services; it is not a universal classification ruling that every clinical-trial supply falls under heading 9981. Confirm the classification and applicable rate against the actual scope of supply and current notifications before invoicing.
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- Identify the actual recipient. Record its location and establish whether the contracting recipient is outside India or in India. Also check whether the parties are establishments of a distinct person under the statutory explanation.
- Describe the supply precisely. Separate research, testing, support, and any other contracted services rather than assuming a broad “clinical trial” label determines the tax result.
- Map goods and work. Document who provides investigational goods, whether the recipient makes goods physically available to the supplier, and where the contracted activities are carried out.
- Determine place of supply. Apply the rule relevant to the service and facts. Do not infer an overseas place of supply from the sponsor’s foreign address or payment currency.
- Test every export condition. For an overseas recipient, verify each Section 2(6) requirement, including permitted receipt of consideration. If the supply qualifies, check the current requirements for the chosen zero-rated route.
- Classify and calculate domestic tax where relevant. Confirm the classification and current rate, then determine whether CGST plus SGST or IGST applies from the supplier’s and recipient’s locations and the place of supply.
The central distinction is recipient location versus place of supply: a domestic sponsor rules out export-of-services treatment, while a foreign sponsor only makes export treatment possible if every statutory condition is met. The Cliantha ruling shows why the service arrangement—including sponsor-provided goods and work performed in India—must be examined before deciding the tax outcome.
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