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2022 (7) TMI 750 - AAAR - GSTClassification of services - supply of space for advertisement in print media - whether the activity is classifiable under HSN 998363 and whether the GST @ 5% is applicable in terms of Sl. No. 21(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended? - HELD THAT - HSN 998366 relates to space other than print media, i.e., advertisements on Billboards, Buildings, Vehicles, Electronic media, and advertising in video motion pictures. Print media includes books, brochures, pamphlets, etc.; newspapers, journals and periodicals; postcards, timetables, forms, posters or other printed matter. The activity of the appellants in the subject case is sale of advertising space in print media and is not on Bill boards, Buildings, Vehicles etc. Therefore, the findings of AAR and its ruling with regard to classification of service is not in consonance with the explanatory notes. As such a fresh look at the activity or service provided by the appellant has to be examined. It is pertinent to note that, Advertising services is a specialized service, which includes a host of activities like planning, concept development, creating the basic idea for an advertisement, writing the words, selection of media to be used, design of ads, illustrations, posters, placement of advertisements in media etc. In the instant case, appellant is selling space for advertisement in print media. Further in some cases, apart from selling space, he is also providing art work, which makes the advertisement more appealing and attractive. And such additional activity is done at no extra cost. However, costing comes into picture after classification. Value addition does not have a bearing in classifying the nature of service provided. As such, the processes, the ingredients, quantity of inputs used in supply, the purpose of art work and its impact of appearance of advertisement will have a bearing on the nature of service supplied. Apart from selling the space for advertisement in print media, the appellant is also providing the services of designing or art work as pronounced in their contentions. Advertising in itself is a specialized service, where the act of exhibiting or marketing information about a product or service provided is important, so as to attract the attention of prospective customer who is likely to be a buyer or customer of the advertiser of that product or service provider. Certainly design or art work will have an impact on the content of advertisement, by which the prospective customer is attracted and falls a prey for the proposed business activity. Therefore, addition of art work cannot be called as a mere activity, but a special feature which enhances the appearance of advertisement and draws attraction of prospective customer. As the appellant is selling space and also providing design or art work, the activity cannot be called as mere selling of advertising space but Advertising Service falling under HSN 998361. Therefore, the concept of composite service for deciding the rate of tax, cannot be applied to Advertising Service, which involves host of activities which have their own relevance and importance. The intent of leaving a space empty is for the purpose of advertisement only. In general, advertising means the action of calling something to the attention of public for the purpose of business - The appellant has not submitted any contract or agreement which tells about the scope of activity involved in printing the advertisement within the given space in print media. As such any additional work or service provided to enhance the appearance of advertisement cannot be called as mere sale of advertising space in print media.
Issues Involved:
1. Classification of services supplied by the appellant. 2. Applicable GST rate on the services supplied. Issue-wise Detailed Analysis: 1. Classification of Services Supplied by the Appellant: The appellant, M/s. Time Education Kolkata Private Limited, is engaged in the business of purchasing and supplying advertisement space in print media, along with providing artwork to adorn the space. The core issue is whether this service can be classified under HSN 998363 as "sale of advertising space in print media" or under a different classification when artwork is included. The appellant argued that their activity, whether with or without artwork, should be classified under HSN 998363, attracting a GST rate of 5% as per Sl. No. 21(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. They contended that the addition of artwork does not change the nature of the service, which remains the sale of advertising space in print media. The Advance Ruling Authority (AAR) initially ruled that the service involving artwork falls under HSN 998366, attracting a higher GST rate of 18%. The AAR distinguished between mere sale of advertisement space in print media (HSN 998363) and other advertising services (HSN 998366), concluding that the latter includes additional services like artwork. Upon appeal, the Appellate Authority examined the explanatory notes for HSN codes and concluded that the appellant's activity, including the provision of artwork, constitutes "Advertising Services" under HSN 998361. This classification encompasses a range of activities such as planning, concept development, design, and placement of advertisements, which aligns with the services provided by the appellant. 2. Applicable GST Rate on the Services Supplied: The appellant sought a GST rate of 5% for their services, arguing that the addition of artwork should not change the classification from HSN 998363. They further contended that if the artwork is considered a separate service, the transaction should be treated as a composite supply under Section 8 of the CGST Act, 2017, with the principal supply being the sale of space in print media, thereby attracting a GST rate of 5%. The AAR had ruled that the inclusion of artwork changes the classification to HSN 998366, attracting a GST rate of 18%. The appellant challenged this, asserting that the artwork is complementary and does not warrant a different classification. The Appellate Authority, however, concluded that the combined service of selling advertisement space and providing artwork constitutes "Advertising Services" under HSN 998361, which attracts a GST rate of 18% as per Serial No. 21(ii) of Notification No. 11/2017-CT(Rate) dated 28.06.2017. The Authority emphasized that the additional activity of providing artwork enhances the advertisement's appeal and cannot be treated as a mere ancillary service. Conclusion: The Appellate Authority set aside the AAR's classification under HSN 998366 and ruled that the services supplied by the appellant fall under "Advertising Services" with HSN code 998361. Consequently, the applicable GST rate is 18%. The appeal was disposed of accordingly, modifying the lower authority's ruling to reflect this reclassification and applicable tax rate.
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