2019 (10) TMI 942 - AAR - GST

Rate of tax - works contract - offset printing of Answer booklets, centre pinning and hand numbering - classified under HSN Code No. 998912 or otherwise? - taxable at 12% or 18%? HELD THAT - In the instant case applicant is supplying answer booklets printed with water mark supplied by the board made using physical inputs including paper belonging to the printer. Here, supply of printing (of the content supplied by the recipient of supply is the ancillary to the principal supply of the answer booklet and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff. Therefore answer booklets provided by the applicant to the Karnataka State Secondary Education Board falling under the Heading 4802 of entry 112 of the scheduled II to the notification 01/2017 Central tax (Rate) dated 28/06/2017 taxable at 6% CGST and 6% SGST.

Issues involved: Classification of goods and services for offset printing work contract under HSN Code, determining whether the activity constitutes supply of goods or services.

Analysis:
1. The applicant, a partnership firm engaged in offset printing, sought an advance ruling on the classification of goods and services under HSN Code for offset printing work contract. They classified the work under HSN Code No. 998912 attracting 12% GST, while other vendors applied an 18% slab rate, prompting the ruling request.

2. The applicant received an order from the Karnataka State Secondary Education Board for printing answer booklets, center pinning, and hand numbering. The board provided the design and format in soft copy for printing, center pinning, and numbering, with the applicant supplying the necessary materials for the printing process.

3. The key issue was whether the activity performed by the applicant should be treated as a supply of goods or services. The applicant argued that the content of the water mark provided by the board was the principal supply, indicating a service, while the physical inputs, including paper, belonged to the applicant, suggesting a supply of goods.

4. The Authority considered the submissions made by the applicant and their Accounts Manager during the personal hearing. They examined the nature of the activity, where the board provided the design and format, but the applicant supplied the printing inputs and paper for the process, leading to the crucial determination of whether it constituted a supply of goods or services.

5. Referring to Circular no.11/11/2017-GST, the Authority clarified that in cases where the content is supplied by the recipient and physical inputs belong to the printer, the supply of printing is considered the principal supply, falling under the category of supply of service. Conversely, if the physical inputs give essential character to the product, it is considered a supply of goods.

6. In the present case, as the applicant supplied answer booklets printed with watermarks provided by the board using physical inputs belonging to the printer, the supply of printing was deemed ancillary to the principal supply of the answer booklets. Therefore, the activity was classified as a supply of goods under the respective headings of Chapter 48 or 49 of the Customs Tariff.

7. Consequently, the Authority ruled that the supply of printed, center-pinned, and hand-numbered answer booklets to the Karnataka State Secondary Education Board constituted a supply of goods falling under Heading 4802 of entry 112 of the Schedule II to the Notification 01/2017-Central Tax (Rate) dated 28/06/2017, taxable at 6% CGST and 6% SGST.

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