2019 (11) TMI 1566 - AAR - GST

Supply of goods or supply of services - activity of procuring PVC material (blank), printing of trade advertisement material on the said PVC material (blank) as per the design and graphics provided by the customer and supply of such printed banners to the shipping location mentioned in purchase order - appropriate classification and HSN Code - HELD THAT -The nature of physical inputs, on which printing activity is carried out, does not change after the process of printing i.e. the napkin, tissue etc., are the same before and after the printing and hence the printing activity is ancillary and hence the supply of the same is that of supply of goods. The classification of the said goods prior or after the printing is same and is either Chapter 48 or 49. In the instant case, it is an admitted fact that the PVC material is classified under Chapter 39 prior to printing and after printing it would become Trade Advertising Material falls under Chapter 49. Therefore the activity of printing makes the PVC material into Trade Advertising Material i.e. banner/billboard etc., and thus the nature of the material changes. Further the applicant does not own or retain the usage rights of intangible inputs. In view of the foregoing the activity of printing of the content, supplied by the recipient, on the PVC material becomes principal supply and such supply constitute supply of service falling under chapter heading 9989 - The Applicant referred to several judgments of the apex court and the Tribunal, which are all related to the classification of the goods being supplied (Trade Advertising Material) as to whether they are to be classified under Chapter 39 or 49 of the Tariff Act. This authority does not dispute the classification of the said goods under Chapter 49. However, in the instant case such supplies are ancillary to the principal supply of Printing Service.

Summary

Issues:
1. Whether the activity of procuring PVC material, printing trade advertisements, and supplying them amounts to the supply of goods under the CGST Act?
2. What is the appropriate classification of the trade advertisements if they are considered as the supply of goods?
3. What is the classification and applicable rate of Central Goods and Services Tax on the supply of trade advertisement material if the transaction is considered as the supply of services?

Analysis:
1. The applicant argued that their activity of printing trade advertisements on PVC material supplied by customers amounts to the supply of goods. They emphasized the transfer of title and relied on a TRU circular for support. The Authority noted that the nature of supply needed examination to determine if it constituted goods or services.
2. The Authority referred to a circular clarifying that the principal supply in printing contracts is the supply of printing, constituting a service. The circular differentiated between supplies of goods and services based on ownership of intangible inputs. In this case, as the applicant did not retain usage rights of intangible inputs, the printing service was deemed the principal supply.
3. The Authority highlighted that the printing service was the predominant element of the composite supply, classifying it under heading 9989. They determined the applicable GST rate to be 18% until 12.10.2017 and 12% thereafter, as per specific notifications.

Conclusion:
The Authority ruled that the transaction involving printing and supplying trade advertisements on PVC material is a composite supply with the printing service as the principal supply. The classification falls under heading 9989 with an applicable GST rate of 18% or 12%, based on the date.