2019 (8) TMI 1156 - AAR - GST

Works contract - classification of supply - supply of goods or supply of service - printing of trade advertisement material - composite supply - principal supply - classification of the trade advertisement material if its transaction is a supply of goods - Circular No. 11/11/2017-GST dated 20/10/2017. HELD THAT - There is no dispute that the Applicant s supply is a composite contract - a transaction involving both services and transfer of property in goods, and the two are inseparable in the execution of the contract. It was a works contract in terms of section 2(57)(d) of the West Bengal Value Added Tax Act, 2003. The legal fiction created by insertion of Art 366(29A) through the 46th Amendment of the Constitution enabled the State Government to split up such contracts into a contract for the sale of goods and a service contract, and levy VAT on the sale of goods. Works contract, as defined in 2(119) of the GST Act, excludes from its ambit all such composite contracts that do not involve building, construction, repair, alteration etc. of any immovable property. Under the GST Act, therefore, the Applicant s supply is no longer works contract, or, for that matter, any other composite contract to which Art 366(29A) of the Constitution applies. Composite contracts that are not covered by Art 366(29A) cannot be split up for taxation into a service contract and a contract for the supply of goods unless the transaction represents two distinct and separate contracts that are discernible as such. The test, therefore, for all such contracts is whether the parties have in mind or intend separate rights arising out of the supply of goods. It is to be ascertained from the substance of the contract. The Applicant loads the content in a digital image printer, prints the image on the PVC material, and supplies the printed material. The goods so supplied have no utility other than displaying the printed content. Service of printing, therefore, is the predominant element of the composite supplies the Applicant is making - Services by way of printing of the goods falling under Chapter 48 and 49 are classifiable under SAC 9989 and taxable under Sl No. 27(i) of Notification No. 11/2017 - CT (Rate) dated 28/06/2017 (corresponding State Notification No. 1135 - FT dated 28/06/2017). The Applicant, being a printer of trade advertising material classifiable under heading 4911 of the Tariff Act, is making a composite supply, where the service of printing classifiable as above, is the principal supply. The goods supplied, having no use other than displaying the printed matter, is ancillary to the principal supply of printing. Thus, the Applicant is making a composite supply, where the service of printing is the principal supply. The goods supplied, having no use other than displaying the printed matter, is ancillary to the principal supply of printing.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant
3. Observation & Findings of the Authority

Admissibility of the Application:
The Applicant sought a ruling on whether printing trade advertisement material constitutes a supply of goods or service and the classification of such material. The questions raised were deemed admissible under relevant sections of the GST Act. The Application was admitted as the issues were not pending in any proceedings and no objections were raised by the revenue officer.

Submissions of the Applicant:
The Applicant engaged in printing various advertisement materials argued that the transaction should be treated as a supply of goods. They contended that the printed material is a composite supply, with the supply of goods being the predominant element. The Applicant cited various judgments to support their position, emphasizing that the recipient's intention was to procure goods in the form of trade advertisement. They further argued that the printed advertisements fall under specific chapters of the Tariff Act.

Observation & Findings of the Authority:
The Authority noted that the Applicant's supply was a composite contract involving both services and transfer of property in goods. The transaction was no longer considered a works contract under the GST Act. The Authority applied the dominant nature test to determine that the principal supply was the service of printing, with the goods supplied being ancillary to this service. The CBIC circular clarified the treatment of such composite printing contracts, highlighting the distinction based on the utility of the printed goods.

Based on the analysis, the Authority ruled that the Applicant's activity constituted a composite supply, with the service of printing being the principal supply. The goods supplied had no utility other than displaying the printed content, making them ancillary to the printing service.

This ruling is valid unless declared void under the provisions of the GST Act.