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2020 (10) TMI 765 - AAR - GSTClassification of supply - supply of goods or not - what is principal supply - transaction of printing of content provided by the customer, on poly vinyl chloride banners and supply of such printed trade advertisement material - trade advertisement material - classification and rate of CGST if the transaction is that of supply of services? Whether the Principal Supply in the said transaction is Supply of trade advertisement- goods or Supply of Printing Service on the desired materials? - HELD THAT - The predominant element in a composite supply would be the one for which the recipient is under taking the transaction with the supplier. It would also be the one which changes the nature of the inputs involved sufficiently enough to justify such a transaction. The other supply would only be ancillary to the main supply and even without that ancillary supply, the nature of the inputs involved would change significantly enough for the recipient to undertake the transaction. In the instant case, the Purchase Order is raised for Prints and the media/material in which the output is required are spelt in. The value of the PO is arrived at based on the number of such advertisings required and the value of the unit number is calculated per dimensions - The recipient has undertaken this transaction with applicant mainly to get the printing services of the applicant. Without the printing activities, the blank PVC flex cannot be used as advertisement materials by the recipients. Even if the blank PVC material is made into banners/ hoardings/ billboard/ standees etc. by adding eyelets, metal rods etc., the transaction would not be complete as per the purchase order placed on the applicant by the recipient. Only if the digital content provided by the recipient is digitally printed onto the PVC material would the transaction be complete. Further, in this case, the nature of the inputs, rolls of PVC Flex materials, is changed in the final supply by the process of cutting to required dimensions, digital printing on that and making that printed sheet into banners/hoardings/billboard/standees etc. by adding eyelets, metal rods etc. Therefore, the predominant supply i.e. the principal supply in the composite supply is the services of printing. As per CBIC vide Circular No.11/ 11/2017-GST dated 20.10.2017, it is evident that Supply of service is the Principal Supply , when the content is supplied by the owner of the intangible input for printing and the physical inputs used are that of the printer and Supply of goods is the Principal Supply in cases where the printing of such content is ancillary to supply of goods. The customer transfers the right to use the intangible inputs (digital images, text etc.) temporarily so that they can be used solely for printing. The applicant does not have the right of usage of such intangible inputs for any purpose nor do they own such inputs. Further, the nature of the physical inputs is not changed with the process of printing as in Para 5 and in that case printing is ancillary supply. In the considered transaction, the supply undertaken by the applicant involves printing of the content which is Art work or in other words, intangible inputs, whose rights are with customer and which are shared with the applicant for printing in the required material/media and supply as advertisement of the customer in the required format. The nature of the physical inputs is transformed with the printing activities and without the printing, the final product cannot be used as a trade material as required by the recipient. Thus the predominant activity is printing the intangible inputs of the customer in the required tangible inputs sourced by the applicant as per Para 4 and going by the clarification above, the principal supply is Supply of Service . Therefore, the supply of printing services on plastic in this case PVC materials are classifiable under SAC 998912. The principal supply being the Supply of service , the composite supply is also classifiable under SAC 998912 and the applicable rate on such supply is that applicable for such SAC. For the period upto 13.10.2017, the applicable rate is 9% CGST as per the entry Sl.No. 27/27(ii). With effect from 13.10.2017, while entry at 27 (ii) is retained as such, entry at 27 (i) is amended. Therefore for the period from 13.10.2017, the applicable rate is 6% CGST, in cases of supply of services of printing of goods falling under Chapter 48 or 49 which attracts CGST@6% or 2.5% or Nil when only content is supplied and physical inputs are of the printer and other Printing services attracts CGST 9% as per entry 27(ii) - In the case at hand, only content is supplied to the applicant and the physical inputs are that of the applicant, hence it is required to correctly classify the printed materials as the GST rate notifications seek to tax differently the printing services based on the classification and applicable rate of such goods on which the printing is done - in the case at hand, the goods on which the applicant provides the printing activities Trade advertisings are classifiable under Chapter 49 attracting CGST @ 6%. In the case at hand, the supply of printing services on PVC materials (goods classifiable under CTH 4911) are classifiable under SAC 998912. Therefore the applicable rate of CGST for the period effective from 13.10.2017 on the supply of services of Printing is covered under entry No. 27(i) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended. Thus, the supply of printing services by the applicant are classifiable under SAC 998912 . The applicable rates are CGST @ 9% and SGST C9% from 01.07.2017 to 22.08.2017 and 22.08.2017 to 13.10.2017 vide entry at Sl.No. 27 27(ii) respectively and effective from 13.10.2017, the applicable tax rate is CGST cu 6% and SGST 4 6% as per the substituted entry at Sl.No. 27 (i).
Issues Involved:
1. Whether the transaction of printing content provided by the customer on polyvinyl chloride (PVC) banners and the supply of such printed trade advertisement material is a supply of goods. 2. Classification of such trade advertisement material if the transaction is a supply of goods. 3. Classification and applicable rate of Central Goods and Services Tax (CGST) on the supply of such trade advertisement material if the transaction is a supply of services. Issue-wise Detailed Analysis: 1. Whether the transaction of printing content provided by the customer on PVC banners and the supply of such printed trade advertisement material is a supply of goods: The applicant is engaged in 'Wide format digital printing' for various trade advertisements. The content for these advertisements is provided by the customer in digital format. The applicant undertakes the process of printing on PVC materials and supplies the final printed product to the customer. The applicant contends that the supply is a composite supply with the principal supply being the trade advertisement (goods). They argue that the transaction should be classified as a supply of goods based on the nature of the final product being movable property. However, the ruling determined that the predominant element in the composite supply is the service of printing, making it a supply of services. The ruling referenced CBIC Circular No. 11/11/2017-GST, which clarifies that when content is supplied by the customer and the physical inputs belong to the printer, the principal supply is the service of printing. 2. Classification of such trade advertisement material if the transaction is a supply of goods: The applicant submitted that printed trade advertisements should be classified under Heading 4911 of the Customs Tariff Act, which includes trade advertising material. They argued that the printed PVC materials should fall under Chapter 49 based on Section Note 2 to Section VII of the Customs Tariff, which states that printed plastics with motifs, characters, or pictorial representations not merely incidental to the primary use of the goods fall under Chapter 49. The ruling did not dispute this classification but emphasized that the principal supply in the composite supply is the service of printing, not the supply of goods. 3. Classification and applicable rate of CGST on the supply of such trade advertisement material if the transaction is a supply of services: The ruling determined that the supply of printing services on PVC materials is classifiable under SAC 998912, which includes printing and reproduction services of recorded media on a fee or contract basis. The applicable tax rate for this service is 9% CGST + 9% SGST from 01.07.2017 to 13.10.2017 as per entry at Sl.No. 27 & 27(ii) of Notification No. 11/2017 CT(Rate) and 6% CGST + 6% SGST from 13.10.2017 as per the amended entry at Sl.No. 27(i) of the same notification. Ruling: 1. The printing of content provided by the recipient on the PVC materials of the applicant and the supply of printed trade advertising material to the recipient is a composite supply, with the 'Supply of service of printing' being the principal supply. 2. The classification of the service is SAC 998912, and the applicable tax rate is 9% CGST + 9% SGST from 01.07.2017 to 13.10.2017 and 6% CGST + 6% SGST from 13.10.2017 onwards.
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