2019 (5) TMI 643 - HC - GST

Classification of books - whether the books Sulekh Sarita Parts I to V are Printed Books classifiable under HSN 4901 or Exercise Books under HSN 4820 of the Central Goods and Service Tax Act? HELD THAT - The Court is conscious that in the note appended to the HSN, it has been stated that Heading 49.01 excludes children s workbook consisting essential pictures with complementary text, for writing another exercises . But then none of the books which form the subject matter of the present petition can be viewed as a mere text for writing or other exercises . These books are meant to help the child think, apply his or her mind and come up with some creative answers. It also tests the listening, comprehension and retention skills of the child; of what is spoken in the classroom and for testing the understanding of the child of that which has been taught. This Court is satisfied that in the present case, the books published and sold by the Petitioner are classifiable under HSN 49.01 and not HSN 48.02. In terms of Notification No.2/2017-Central Tax (Trade) dated 28th June, 2017 i.e. Entry No.119 thereunder, such goods classifiable under HSN 49.01 i.e. printed books, including Braille books are wholly exempted from tax. Since, this is the only question that has been raised before the Court, the impugned order dated 9th April 2018 to that extent is hereby set aside - petition allowed.

Summary

Issues Involved:
1. Classification of 'Sulekh Sarita Parts I to V' under HSN 4901 or HSN 4820.
2. Requirement for registration under the GST Act for suppliers of wholly exempted goods.

Issue-wise Detailed Analysis:

1. Classification of 'Sulekh Sarita Parts I to V' under HSN 4901 or HSN 4820:

The central question in this petition is whether 'Sulekh Sarita Parts I to V' should be classified as 'Printed Books' under HSN 4901, which would exempt them from tax under the CGST Act and Delhi GST Act, or as 'Exercise Books' under HSN 4820, which would subject them to a 6% tax.

The Authority for Advance Rulings (AAR) had previously classified these books under HSN 4820, stating that they are 'Exercise Books' because they primarily contain printed text with spaces for copying manually, and any printed exercises or questions are incidental.

However, the High Court examined the books and found that they contain substantial portions where students are required to answer questions, write the meanings of words, compose short essays, and perform other exercises that test their comprehension and retention skills. The Court noted that these activities go beyond mere copying and require the application of the student's mind.

The High Court emphasized the 'functional characteristics' of the books, stating that they serve as educational tools that enhance a child's learning and comprehension abilities. The Court concluded that these books are not merely for improving handwriting but are designed to test and develop the student's knowledge and understanding.

Therefore, the High Court held that 'Sulekh Sarita Parts I to V' should be classified under HSN 4901 as 'Printed Books,' which are exempt from tax under the relevant GST notifications.

2. Requirement for registration under the GST Act for suppliers of wholly exempted goods:

The petitioner had also raised the issue of whether a person exclusively supplying wholly exempted goods is required to register under the GST Act. The AAR had ruled that the petitioner must register if they have GST liability under the Reverse Charge Mechanism (RCM), despite being exempt from paying tax under Section 23(1)(a) of the CGST Act.

However, the petitioner had already registered under the GST Act, and the High Court did not examine this issue further, as all grounds raised pertained to the classification of the books.

Conclusion:

The High Court set aside the AAR's order classifying 'Sulekh Sarita Parts I to V' under HSN 4820 and held that they should be classified under HSN 4901, making them exempt from tax. The writ petition was allowed, with no orders as to costs.