2019 (10) TMI 526 - AAR - GST

Classification of supply - supply of goods or supply of services - rate of tax - printing and supply of paper and paper boards - printing under job work. Where the principal material i.e. paper and paperboard belong to the applicant, on which the content supplied by the customer is printed and the finished goods are supplied - HELD THAT - Since the printing would be the principal supply of the composite supply, in these cases, the entire composite supply would be treated as a supply of services by way of printing (principal supply) and the tax rate applicable to such printing would be applicable on the entire value of such supply. Entry no. 27 of Notification No. 11/2017 - Central Tax (Rate) was substituted to bring in the sub-entry (i) which reads as Services by way of printing of newspapers, books (including Braille books), journals and periodicals, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer which deals with printing of newspapers, books, journals and periodicals on the physical inputs of the printer himself, which is taxable at 12% - If the printed item is not newspaper or book or journal or periodical, then the services of the applicant is covered under Entry No. 27(ii) which reads other manufacturing services; publishing, printing and reproduction services; material recovery services, other than (i) above and hence is liable to tax at 18% Where the principal material i.e. paper and paperboard belong to the customer, on which the content supplied by the customer is printed and the finished goods are supplied - HELD THAT - Since the nature of activity of the applicant is printing, entry 26(ii)(b) is not applicable. If the final printed material is a book or a journal or a periodical and if the materials on which the printing is done are provided by the customers, then the activity would be covered under entry 26(i)(d) and would be liable to tax at 2.5% CGST plus 2.5% SGST. But if the final printed material is other than a book or a journal or a periodical but the involves the jobwork of printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6 per cent, then the activity is liable to tax at 6% CGST plus 6% SGST - But, if the jobwork of printing made on the materials belonging to other is not covered by the above two items, then the same is liable to be covered under Entry No. 26(iii) and is liable to tax at 9% CGST plus 9% SGST.

Summary

Issues Involved:

1. Classification of the applicant’s activities as supply of goods or services.
2. Determination of the applicable tax rates for the activities under different scenarios.

Detailed Analysis:

Issue 1: Classification of Activities

The applicant sought clarification on whether their activities fall under "supply of goods" or "supply of services" and the applicable tax rates. The activities involve printing and supplying paper and paper boards, either using their own materials or materials provided by customers.

Analysis:

1. Supply of Goods or Services:
- Scenario 1: When the applicant supplies printed materials using their own paper and paper boards with content provided by the customer, it constitutes a composite supply. According to Section 2(30) of the CGST Act, a composite supply involves two or more supplies naturally bundled and supplied together. Here, the principal supply is the printing service, making it a supply of services.
- Scenario 2: When the customer supplies the paper and paper boards, and the applicant provides printing services, it is considered job work. This falls under "manufacturing services on physical inputs (goods) owned by others" as per Entry No. 26 of Notification No. 11/2017 - Central Tax (Rate).

Issue 2: Applicable Tax Rates

Analysis:

1. Scenario 1: Applicant’s Materials
- Composite Supply: The principal supply is printing, and the tax rate depends on the nature of the printed material:
- Books, Journals, Periodicals: Taxable at 12% (6% CGST + 6% SGST) under Entry No. 27(i) of Notification No. 11/2017.
- Other Printed Materials: Taxable at 18% (9% CGST + 9% SGST) under Entry No. 27(ii) of Notification No. 11/2017.

2. Scenario 2: Customer’s Materials
- Job Work: The tax rate varies based on the type of printed material:
- Books, Journals, Periodicals: Taxable at 5% (2.5% CGST + 2.5% SGST) under Entry No. 26(i)(d).
- Materials under Chapter 48 or 49: Taxable at 12% (6% CGST + 6% SGST) under Entry No. 26(ia)(b).
- Other Job Work: Taxable at 18% (9% CGST + 9% SGST) under Entry No. 26(iii).

Ruling:

1. Applicant’s Materials:
- Books, Journals, Periodicals: Taxable at 12% (6% CGST + 6% SGST).
- Other Printed Materials: Taxable at 18% (9% CGST + 9% SGST).

2. Customer’s Materials:
- Books, Journals, Periodicals: Taxable at 5% (2.5% CGST + 2.5% SGST).
- Materials under Chapter 48 or 49: Taxable at 12% (6% CGST + 6% SGST).
- Other Job Work: Taxable at 18% (9% CGST + 9% SGST).

The judgment clarifies the classification and applicable tax rates for the applicant’s printing activities under different scenarios, ensuring compliance with the CGST and KGST Acts.