GST Council may grant export status to clinical trials for foreign sponsors

The Goods and Services Tax Council is examining proposals that would classify clinical trials conducted for foreign sponsors as exports, a move aimed at easing the tax burden on India's pharmaceutical and contract research organisations.

Under consideration are several supportive measures, including input tax credit relief on free samples distributed during trials and the extension of GST benefits to expired drugs used in research activities. These provisions would provide additional tax advantages to companies conducting clinical research for international clients.

A significant component of the proposal involves allowing drugmakers to claim a 90 per cent refund of accumulated GST credit, a measure designed to alleviate working-capital pressures faced by the industry. Clinical trial costs often require substantial upfront investment, and the refund mechanism would help improve cash flow for pharmaceutical companies engaged in this sector.

The pharmaceutical industry has long sought export status for clinical trials, arguing that such trials generate foreign currency and contribute to India's healthcare research capabilities. Granting export classification would align clinical trial services with other export-oriented sectors and provide tax parity with companies selling physical goods abroad.

The Council's decision on these proposals could substantially benefit India's growing contract research and manufacturing services sector, which plays a crucial role in global pharmaceutical development and attracts significant foreign investment.