2020 (1) TMI 138 - AAAR - GST

Classification of supply - supply of goods or not - job of printing of content provided by the customer on polyvinyl chloride banners and supplying such printed trade advertisement material - para 5 of CBIC Circular No. 11/11/2017-GST dated 20.10.2017 - classification of trade advertisement material under GST Tariff - challenge to AAR decision. HELD THAT - On reading paragraphs 4 and 5 of Circular No. 11/11/2017-GST dated 20.10.2017 it can be concluded that items mentioned in para 4 have no secondary use other than carrying the printed content whereas the articles mentioned in para 5 have secondary usage. Though wallpaper displays designs printed or embossed on its body, it has another use that of protecting the wall. In the instant case the PVC sheet does not have any other usage other than displaying the advertisement content. In the present case, the Appellant prints the content provided by the recipient on the base of PVC, paper, etc., where it provides both the printing ink and the base material. There cannot be any doubt that the content that is printed on the base material is owned by the customers of the Appellant only and the Appellant has no right of usage on the content. The Appellant produced at the time of hearing a few samples of their products, for example, advertising materials for Hero Glamour motorbikes, Hyundai Venue car, Vivel Cool Mint soap and Brides India . The said advertisement materials carry specific messages meant for customers and the contents are very specific to the product for which the advertisements are made. The advertisement meant for Hyundai cannot be used by Hero or any other company. Thus the content is exclusively the property of the client who entrusts the job to the Appellant and the usage right of the content remains with the client or the Appellant - thus, in the instant case, which is a composite supply. supply of service is predominant and the case or the Appellant is more akin to the case represented in paragraph 4 of Circular No. 11/11/2017- GST dated 20.10.2017. The Appellant argued that the product description in their invoice is mentioned as Printing and Supply of Trade Advertisement Material HSN # 4911 , because what they supply are primarily goods - it is clear beyond doubt that what the Appellant supplies is nothing but service. Hence, we find no basis in the argument of the Appellant that it supplies goods only. The ruling pronounced by the WBAAR upheld - appeal fails.

Summary

Issues:
- Whether printing of content on polyvinyl chloride banners and supplying such printed trade advertisement material amounts to supply of goods.
- What is the classification of such trade advertisement material under GST Tariff if the transaction is a supply of goods.

Analysis:
1. The Appellant, engaged in printing trade advertisement material, sought an advance ruling on whether their activity amounts to a supply of goods and the classification under GST Tariff.
2. The WBAAR held that the transaction constitutes a composite supply involving both goods and services, with printing being the predominant element. The printed material was deemed to have no utility other than displaying content, classifying it under Chapter 39 and 49 of the Tariff Act as ancillary to the principal supply of printing service.
3. The Appellant challenged the ruling citing the Telangana AAR's decision treating printed trade advertisement as goods, arguing that the printed material falls under the definition of 'goods' in the GST Act.
4. Reference was made to CBIC Circulars supporting both positions, with the Appellant asserting their supply qualifies as goods under a specific subheading in the Tariff Act.
5. The Appellant emphasized their activity as a composite supply where the principal supply is goods, citing relevant sections and classifications to support their claim.
6. The Respondent highlighted the necessity of printing on the PVC material for its utility, supporting the WBAAR's position on the nature of the supply.
7. The judgment analyzed conflicting interpretations of CBIC Circulars, emphasizing the distinction between scenarios where usage rights are owned by the supplier of content and where they are not, to determine the principal supply.
8. It was concluded that the printed material in question had no secondary use beyond displaying content, aligning it more closely with the scenario described in a specific paragraph of the Circular.
9. Samples of the Appellant's products were examined to establish the exclusive ownership of content by customers, leading to the determination that the predominant supply was a service, as per the Circular's classification.
10. Contradictions in the product descriptions on invoices and purchase orders were used to support the finding that the supply was primarily a service, not goods.
11. The appeal was dismissed, upholding the ruling of the WBAAR, as the Appellant failed to establish their supply as goods based on the provided evidence and arguments.