2020 (5) TMI 219 - AAR - GST

Benefit of exemption from GST - E-book or not - assessee/dealer which publishes law journals in print and sells the same content that is in books in an electronic form in DVD s/CD s with a software to search and read it in computers and hand held devices - Eligibility for benefit of notification dated 26.07.2018 - adjustment of liability with ITC on the sale of DVD/pen drive which contains printed version of law citations - adjustment of liability with ITC on sale of e-book of printed version of law citation - reversal of balance of ITC after adjustment accrued on the purchase of paper and other material while filing GSTR 9 - scope of Advance Ruling application. Eligibility of benefit of notification dated 26.07.2018 in respect of E-book - HELD THAT - In the case at hand, the applicant has stated that the printed law journals/books/periodicals are sold in electronic form of DVDs/CDs with a Dongle as a security lock with proprietary software, the updates for which are supplied online when the customer connects to internet. The initial supply is with a subscription for a period of 1 year, the renewal of which do not require any more supply of DVDs/ CDs but done on payment of subscription for the further period - It is seen that the software gives the user option to search various Acts, case laws on Criminal Law, Cr.P.C., I.P.C., Evidence Act, etc hitherto published in the journal. The software is updated with new content, updates of cases when connected to internet. Thus, it is seen that the DVD in effect contain software which requires an End User License Agreement to be accepted by the user. The DVD is not an electronic version of the print journals. If it was an electronic version of the print journals, the DVD would have machine readable files in any format such as .doc, .txt, .pdf or any other readable files and not the executable file ( setup application) which it has. The Dongle acts as a key and has some software installed on it which allows the application to be used and updates installed. When the applicant supplies the DVDs/CDs with Dongle, the supply consists of (1) supply of DVDs/CDs and Dongle and (2) The Law Weekly Desktop Software application loaded onto the DVD/CD and proprietary software the Dongle. The software comes with End User Licence with weekly updates online during the period of subscription. Thus the supply of DVDs/CDs dangle with access for an initial subscription period is a composite supply involving supply of DVD/CD Dongle and the loaded software (Goods) along with license to use the same for a limited period (service) - thus, the supply of DVD/CD Dangle loaded with The Law weekly Desktop Software is an optical media loaded with software and the licence to use the software during the subscription period is a supply of service made along with the principal supply of goods in the said Composite Supply . The DVD/CD Dongle being Storage Devices containing the software is the principal supply. The supply of DVD/CDs with the loaded The Law Weekly Desktop Software along with its end user license by the applicant is a supply of goods classifiable under CTH 85238020. Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 provides the applicable rates for various services. As per the Explanation given in the above entry, e-books are electronic version of a printed book falling under the tariff item 4901 and supplied online which can be read on a computer or a hand held device, while in the case at hand, the contents supplied in the form of DVD/CD is a software which is used to access content containing the judgments of various fora, case laws Acts, etc which provides for searching using a particular case number/period/act/court or a combination of the above - The DVD/CDs do not contain electronic versions of the journals but an executable software application and therefore do not fall under the explanation of e-book given in the said entry. The supply involves access to an on-line database hosted on the website of the applicant. Thus, it is evident that the above are not e-books but supply of access to an online database online text based information SAC 9984311 and therefore the entry at Sl.No. 22 of the Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 is not applicable to the case at hand. Adjustment of liabilities against ITC - HELD THAT - The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97 (2) and no other issue can be decided by the Advance Ruling Authority - these issue relates to utilization of credit availed by the applicant and that of reversal of credit availed, which do not fall under any of the category specified under Section 97(2) of the Act and therefore are not within the ambit of this authority.

Summary

Issues Involved:
1. Classification of law journals in electronic form (DVDs/CDs) as "E-Book".
2. Adjustment of liability on the sale of DVDs/pen drives against available ITC.
3. Adjustment of liability on the sale of e-books against available ITC.
4. Reversal of balance ITC accrued on the purchase of paper and other materials while filing GSTR 9.

Issue-Wise Detailed Analysis:

1. Classification of Law Journals in Electronic Form as "E-Book":
The applicant, engaged in the supply of printed law journals and DVDs of law journals, sought a ruling on whether their electronic form (DVDs/CDs with software) qualifies as an "E-Book" under Notification No. 13/2018-C.T.(Rate) dated 26.07.2018. The Authority for Advance Ruling (AAR) analyzed the nature of the DVDs/CDs supplied, which included proprietary software for searching and reading judgments. The ruling clarified that these DVDs/CDs do not merely contain electronic versions of printed journals but are software applications requiring an End User License Agreement. Therefore, they do not fall under the definition of "E-Book" as per the notification, which refers to electronic versions of printed books supplied online and readable on computers or handheld devices. Consequently, the supply of these DVDs/CDs with software does not qualify for the reduced tax rate applicable to "E-Books."

2. Adjustment of Liability on the Sale of DVDs/Pen Drives Against Available ITC:
The applicant queried whether the liability on the sale of DVDs/pen drives containing printed versions of law citations could be adjusted against available Input Tax Credit (ITC). The AAR noted that this question pertains to the utilization of credit availed by the applicant, which does not fall under the categories specified under Section 97(2) of the CGST/TNGST Act. As such, the AAR did not offer a ruling on this issue.

3. Adjustment of Liability on the Sale of E-Books Against Available ITC:
Similarly, the applicant asked whether the liability on the sale of e-books of printed versions of law citations could be adjusted against available ITC. The AAR again highlighted that this issue relates to the utilization of credit, which is not within the scope of the Advance Ruling Authority as defined by Section 97(2) of the CGST/TNGST Act. Therefore, no ruling was provided on this matter.

4. Reversal of Balance ITC Accrued on the Purchase of Paper and Other Materials While Filing GSTR 9:
The applicant sought clarification on whether the balance of ITC after adjustment accrued on the purchase of paper and other materials could be reversed while filing GSTR 9. The AAR pointed out that this question involves the reversal of credit availed, which is outside the purview of the Advance Ruling Authority according to Section 97(2) of the CGST/TNGST Act. Consequently, the AAR did not address this issue.

Conclusion:
The AAR ruled that the supply of DVDs/CDs with "The Law Weekly Desktop" software and access to the online database on the applicant's website do not qualify for the benefits of entry at Sl.No. 22 of Notification No. 13/2018-C.T.(Rate) dated 26.07.2018, as they do not meet the definition of "E-Book." Questions related to the adjustment and reversal of ITC were not answered as they fall outside the jurisdiction of the Advance Ruling Authority.