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2021 (3) TMI 499 - AAAR - GSTClassification of supply - supply of services or supply of goods - composite supply or not - principal supply or not - transaction of printing of content provided by the customer on PVC banners and supply of such printed trade advertisement - trade advertisement material - Classification and applicable rate of GST on the supply of such trade advertisement material if the transaction is that of a supply of Services - challenge to AAR decision - it was held by AAR, Tamil Nadu that 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). HELD THAT - The Purchase Order is made for Printing of content on a particular media and the Tax Invoice describes the item as Printing and Supply of Trade Advertisement Material . From the write-up on business activities and process-Scope of Macromedia furnished by the appellant, it is seen that their Scope in the supply is to get the ready- to- print design from customer, check quality of design and printability on the specified sizes and applications like outdoor print, indoor print or signage print and printing the finalized drafts and delivering the same either to the corporates/agencies or the vendors. Thus, it is seen that the appellant owns the media(material) in which the digital content received by them for printing is printed and the supply of such printed goods is made to the client. Reliance has been placed in the case of STATE OF TAMIL NADU VERSUS ANANDAM VISWANATHAN 1989 (1) TMI 359 - SUPREME COURT - the decision has been pronounced to decide whether the printing of the content received from the clients on the material Of the respondents and supply of such printed material is sale of goods under the sales tax provisions. The definition of Goods remains the same in the Sale Tax provisions and the GST Law and therefore the ratio of the above decision can be applied to the case at hand. It is evident that the Purchase Order is issued for Printing the Copyrighted Digital Content of the client in the desired material. The material blanks owned by the appellant are transferred to the client as Trade Advertisement material after undertaking Printing of the Content of the client on the blanks. The appellant is vested with and undertakes the printing of the content, the copyright of which rests with the recipient and the copyright always rests only with the client and the appellant do not have any propriety rights to the content - Once it is held that the activity is a contract for work or service wherein there is also transfer of property in goods incidentally then it is a composite supply as per Section 8 of the GST Act. Ongoing through the Purchase Order, write-up giving the scope of the appellant, it is evident that the client desires the print of the content in a particular media and the contract with the appellant is not for the materials they own - the activity of Printing of the content is the principal supply during which the property held by the appellant in the media of such print gets transferred to their client incidentally. The decision of Advance Ruling Authority upheld.
Issues Involved:
1. Whether the transaction of printing of content provided by the customer on PVC banners and supply of such printed trade advertisement 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 GST on the supply of such trade advertisement material if the transaction is that of a supply of services. Detailed Analysis: Issue 1: Whether the transaction of printing of content provided by the customer on PVC banners and supply of such printed trade advertisement is a supply of goods. The Appellant argued that their activity constitutes a supply of goods, specifically trade advertisement materials, and not a composite supply of goods and services. They claimed that the printed trade advertisement materials are tailor-made goods manufactured as per customer specifications. The Appellant contended that the principal supply is the supply of goods (trade advertisement material) and the activity of printing is ancillary to this supply. The Authority, however, held that the activity is a composite supply where the principal supply is the service of printing. The Authority reasoned that the Appellant does not own the usage rights of the intangible inputs provided by the customer and that there is a transformation in the nature of physical inputs, which aligns with paragraph 4 of Circular No. 11/11/2017-GST dated 20.10.2017. This paragraph states that printing services are the principal supply when the physical inputs change significantly due to the printing process. Issue 2: Classification of such trade advertisement material if the transaction is a supply of goods. The Appellant maintained that if the transaction is considered a supply of goods, the printed advertisement materials should be classified under Heading 4911, which covers trade advertising material. This classification was supported by various rulings and circulars, including the Board’s Circular F. No. 332/2/2017-TRU dated 07.12.2017, which clarified that posters printed on synthetic media fall under HS Code 4911 and attract 12% GST. Issue 3: Classification and applicable rate of GST on the supply of such trade advertisement material if the transaction is that of a supply of services. The original authority classified the service under SAC 998912 with an applicable tax rate of 9% CGST + 9% SGST for the period 01.07.2017 to 13.10.2017, and thereafter 6% CGST + 6% SGST as per the relevant notifications. The Appellant argued that even if considered a composite supply, the principal supply should be the supply of goods, thereby attracting the GST rate applicable to goods under Heading 4911. Personal Hearing and Further Submissions: During the virtual personal hearing, the Appellant reiterated their position that the activity should be considered a supply of goods. They also referenced the Karnataka Appellate Authority’s ruling in their favor, which held that digital printing on PVC material constitutes a supply of goods. Discussion and Conclusion: The Authority examined the nature of the contract and the transaction, referencing several judicial precedents. They concluded that the primary difference between a contract for work or service and a contract for sale is that in the former, the person rendering the service does not have property in the thing produced as a whole. Applying this to the case at hand, the Authority determined that the Appellant’s activity is a contract for work or service, not a contract of sale of goods. The Authority found that the printed trade advertisement material is produced by printing the customer’s content on the Appellant’s media, and the copyright of the content remains with the customer. The Authority held that the activity is a composite supply with the principal supply being the service of printing. The supply of the media (PVC material) is incidental to the principal supply of printing services. Therefore, the transaction is classified as a supply of services under SAC 998912, with the applicable GST rates as previously determined. Order: The Authority upheld the original ruling, confirming that the transaction is a composite supply with the principal supply being the service of printing. The subject appeal was disposed of accordingly.
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