2020 (12) TMI 1332 - AAR - GST

Classification of supply - supply of goods or supply of services - activity of printing of Answer Booklets / Answer Copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper printing ink etc. - answer booklet is classifiable under Chapter Heading 4820 or 4911? - rate of tax - HELD THAT - Principal supply has been defined in Section 2(90) of the Central Goods and Services Tax Act as supply of goods or services which constitutes the predominant element of a composite supply and to which if any other supply forming part of that composite supply is ancillary - In the case of printing of books pamphlets brochures annual reports and the like where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer supply of printing of the content supplied by the recipient of supply is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services. In the instant case applicant is supplying answer booklets/copies with or without OMR having its name logo etc. of his customer and the printing material used in printing of the said items pertains to the applicant. We further observe that the supply of printing to the content as supplied by the recipient of the supply is the ancillary to the principal supply of the answer booklets/copies with or without OMR therefore the supply will be considered a supply of goods falling under respective heading of chapter 48 or 49 of custom tariff. The activity of printing of Answer Booklets/ Answer copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper printing ink etc. is Supply of goods falling under chapter Heading/ Tariff item 4820 of entry 123 of the schedule II to the notification 01/2017 central tax (Rate) dated 28/06/2017 as amended and chargeable to GST @ 12%

Issues Involved:

1. Whether the activity of printing and supplying answer booklets to educational institutions constitutes a 'Supply of Goods' or 'Supply of Services'.
2. Classification of the answer booklets under the appropriate Chapter Heading.
3. Determination of the applicable rate of tax on the answer booklets.
4. If classified as 'Supply of Services', eligibility for exemption and appropriate Service Accounting Code (SAC) and applicable tax rate.

Issue-wise Detailed Analysis:

1. Supply of Goods or Supply of Services:

The applicant is engaged in the business of supplying answer booklets to educational institutions. The process includes procuring raw materials, printing the content provided by educational institutions, cutting, stitching, bundling, and delivering the booklets. The major cost component is the paper (80%), with printing and packaging accounting for the remaining 20%.

The applicant contended that the supply of answer booklets is a composite supply of goods and services, with the principal supply being the goods (answer booklets). They referenced Section 2(30) and 2(90) of the CGST Act, 2017, which define 'Composite Supply' and 'Principal Supply'. They argued that the primary use of the answer booklets is for writing, making the printing incidental.

The Authority for Advance Ruling (AAR) observed that the supply of answer booklets, where the content is provided by the recipient and the physical inputs belong to the printer, constitutes a supply of goods. This is in line with Circular No. 11/11/2017-GST, which clarifies that the principal supply in such cases is the goods, and the printing is ancillary.

2. Classification under Chapter Heading:

The applicant suggested that the answer booklets should be classified under Chapter Heading 4820, similar to notebooks, as the printing is incidental to their primary use for writing.

The AAR referred to Circular No. 1052/1/2017-CX and Circular No. 1057/06/2017-CX, which classify answer booklets under Chapter Heading 4820. The circulars clarify that answer booklets, with or without OMR, are not loose sheets and are intended for writing, making the printing incidental. Hence, they fall under Chapter Heading 4820.

3. Applicable Rate of Tax:

The applicant argued for a GST rate of 12%, applicable to notebooks under Chapter Heading 4820.

The AAR confirmed that the answer booklets fall under Heading/Tariff item 4820 of entry 123 of Schedule II to the Notification No. 01/2017-Central Tax (Rate), dated 28/06/2017, as amended. Therefore, the applicable GST rate is 12% (CGST 6% + SGST 6%).

4. If Classified as Supply of Services:

The applicant also sought clarity on the classification and tax rate if the supply is considered a service. They argued that if treated as a service, it should be exempt under Entry No. 66(b)(iv) of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, which exempts services related to the conduct of examinations by educational institutions.

However, the AAR did not need to address this issue as they concluded that the supply of answer booklets is a supply of goods.

Ruling:

The activity of printing and supplying answer booklets to educational institutions using the applicant's raw materials is classified as a "Supply of Goods" under Heading/Tariff item 4820 of entry no. 123 of Schedule II to the Notification No. 01/2017-Central Tax (Rate) dated 28/06/2017, as amended, and is chargeable to GST at 12% (CGST 6% + SGST 6%).

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