2022 (8) TMI 864 - AAR - GST

Classification of services - printing services - Karnataka Text Book Society (KTBS) can be classified as educational institution or not - KTBS is a State Government or not - rate of tax being charged at present by printers on the printing of text books supplied to the Karnataka Text Book Society - HELD THAT - KTBS is a Society registered under the Karnataka Societies Act, 1960 and receives grants from the Government of Karnataka for the supply of textbooks freely to students enrolled in government and aided schools and by sales to private schools affiliated to the Karnataka State Board - KTBS is not an institution providing services by way of pre-school or higher secondary education or education as a part of curriculum or as a part of approved vocational education course, but it is society which is only into supply of textbooks to students. Hence we can say that KTBS cannot be classified as educational institution for the reasons mentioned above. As already said above, KTBS is a Society registered under the Karnataka Societies Act, 1960, the same cannot be considered as State Government . Since the applicant has stated that he provides the materials (physical Inputs) and the content is owned by the KTBS, the applicant is into printing of the content supplied by the recipient of supply and the same is the principal supply. Therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services - Rate of tax being charged at present by the printers on the printing of textbooks supplied to KTBS i.e., @ 12%, is incorrect and the same is taxable @ 18% as per entry No. 27 of Notification No.11/ 2017-Central Tax (Rate) dated 28.06.2017 further amended vide Notification No.6/ 2021-Central Tax (Rate) dated 30.09.2021.

Issues Involved:
1. Classification of Karnataka Textbook Society (KTBS) as an "educational institution" for GST applicability.
2. Classification of KTBS as "State Government" for GST applicability.
3. Correct rate of GST on printing services provided to KTBS.

Detailed Analysis:

1. Classification of KTBS as an "Educational Institution":

The applicant sought to classify KTBS as an "educational institution" under GST law, which would impact the tax rate on printing services. According to Notification No. 12/2017-Central Tax (Rate), an "educational institution" is defined as an institution providing services by way of pre-school education, education up to higher secondary school, education as part of a curriculum for obtaining a qualification recognized by law, or approved vocational education courses.

KTBS is a society registered under the Karnataka Societies Act, 1960, and receives grants from the Government of Karnataka for supplying textbooks to students in government and aided schools, as well as selling to private schools. However, KTBS does not provide educational services directly. It only facilitates the distribution of textbooks, which are essential but ancillary to the educational services provided by schools.

Thus, KTBS cannot be classified as an "educational institution" as it does not directly impart education or conduct examinations. This interpretation aligns with the definition provided in the notification and the comments from the Assistant Commissioner of Central Tax.

2. Classification of KTBS as "State Government":

The applicant alternatively argued that KTBS should be classified as "State Government" for GST purposes. KTBS is established by a government order and functions under the Education Department of Karnataka, receiving full funding from the state government. Despite this, KTBS is a registered society and not a direct government entity.

The Authority for Advance Rulings (AAR) referenced a similar case from Kerala, concluding that KTBS could be considered a "Governmental Authority" under Para 2 (4) of Notification No. 12/2017-Central Tax (Rate), but not as "State Government." Therefore, KTBS cannot be treated as "State Government" for GST applicability.

3. Correct Rate of GST on Printing Services Provided to KTBS:

The applicant is currently charging 12% GST on the printing of textbooks supplied to KTBS. The AAR clarified that the supply of printing services, where the printer provides physical inputs like paper and ink, constitutes a supply of service under heading 9989. This classification is based on Circular No. 11/11/2017, which states that such supplies are considered services when the content is provided by the recipient (KTBS).

According to Entry No. 27 of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 6/2021-Central Tax (Rate), the applicable GST rate for "Other manufacturing services; publishing, printing and reproduction services; material recovery services" is 18%. Therefore, the current rate of 12% is incorrect, and the correct rate should be 18%.

Ruling:

1. KTBS cannot be classified as an "educational institution" for the purposes of GST applicability on printing services provided by the applicant.
2. KTBS cannot be classified as "State Government" for the purposes of GST applicability on printing services provided by the applicant.
3. The rate of tax being charged at present by the printers on the printing of textbooks supplied to KTBS, i.e., 12%, is incorrect. The correct applicable rate is 18% as per Entry No. 27 of Notification No. 11/2017-Central Tax (Rate), as amended.

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