In re Temple Packaging Pvt. Ltd.(AAR Daman and Diu)
In the present case against application dated 09.03.2018 of M/s. Temple Packaging Pvt. Ltd., behind Olive Healthcare, Hatiyawad. Village, Dabhel, Nani Daman, Advance Ruling is given that printing of Pamphlet/leaflet falls under the category of supply of service falling under SAC No. 9989. The case is disposed off accordingly.
On appeal AAAR not find any reason to interfere with the order of the Advance Ruling Authority.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, DAMAN/DIU/DNH
PROCEEDINGS
(Under Section 101 of the Central Goods and Services Tax Act. 2017 and the Union Territory Goods and Services Tax Act. 2017)
At the outset, we would like to make it clear that the provisions of both, the Central Goods and Services Tax Act. 2017 and the Union Territory Goods and Services Tax Act, 2017 arc the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Union Territory Goods and Service Tax Act.
The present appeal has been filed under Section 100(1) of the Union Territory Goods & Services Tax Act 2017 /Central Goods & Services Tax Act 2017 (hereinafter referred to the Act”) by M/s. Temple Packaging Pvt. Ltd., (herein after referred to as ‘the appellant” for the sake of brevity) The appeal is filed against the Order No.01/Daman/2019-20-AR dated 18.07.2019 passed by the Union Territory’ Authority for Advance ruling on the application for advance ruling filed by the appellant. The appellant is registered under GST vide GSTIN 25AAACT9O39PIZR.
BRIEF FACTS OF THE CASE
The appellant is engaged in the activity of printing leaflets (further divided into insert/outsert) and falling under CHS No. 4901. the said product is manufactured out of the inputs namely paper/ink owned by the appellants and content supplied by the clients mainly located in the pharmaceutical sector. The leaflets manufactured by the appellants are sold to the clients on agreed consideration which is entirely based on the manufacturing expenses incurred by the appellants by using inputs owned by the appellants.
Under Central Excise regime they cleared the same as excisable goods under CHS No. 4901 as exempted being chargeable to NIL tariff rate, they migrated to GST regime w.e.f. from 1st July 2017 and started supplying the same as supply of goods on payment of 5% GST levied at Sr. 201 of Schedule-I of Notification no. 1/2017-CT(Rate) dated 28.06.2017.
The Delegation of the federation of Master Printers, to which the appellant is a member, met with the officials in Ministry of finance in New Delhi on 21.07.2017 to seek clarification on GST rates applicable to various printed products and during the course of meeting it was made to understand that when the printed products are made by using content supplied by the customer, then it will have to be classified under the category of service and will fall under the SAC 9988. In view of the clarification provided by the federation, most of the members started clearing the goods under the category of service instead of goods and the appellant also started clearing the goods under the category of service SAC no. 9989 by paying 18% GST.
The CBIC vide Circular No. 11/11/2017-GST dated 20.10.2017 Para No. 3 clarified that the classification has to be decided on the basis of principal supply as defined under Section 2(90) of the CGST Act 2017. however, para-No. 5 further clarified that the supply can be treated as goods only when printed with design, logo etc: supplied by recipient of the goods. According to the appellant, the said clarification did not specifically deal with the issue when lire client (other than publisher) is merely providing content to manufacture leaflet which is used by client for industrial purpose as insert/outsert in final product manufactured by them at their end. The CBEC vide circular no. 27/01/2018-GST dated 04-01-2018 at Para no. 6 clarified mainly with regard to printing and publication of books and did not directly deal with the issue on hand. The ambiguity continued and the divergent practice was prevailing in the industry where some of the manufacturers cleared it as goods on payment of 5% GST under CHS 4901 and some of the manufacturers cleared it under the category of goods on payment of 12% GST under CHS 4911 to avoid risk of recovery of differential amount of GST at later stage. The appellants are engaged in supplying printed leaflets to customers located in SEZ and also in physical export/deemed export against EPCG/advance license. While effecting zero rated supply to SEZ units or against own EPCG license the appellants were facing difficulty to account for against export obligation as they needed to fulfil the export obligation by delivering as goods under CHS No. 4901.
APPLICATION FOR ADVANCE RULING
In view of the above uncertainty regarding taxability on supply of leaflets, the appellant preferred an application before the Advance Ruling Authority seeking clarification on the following question:
The printed leaflet supplied by the applicant falls under the category of supply of goods falling under CHS No. 4901 and not as a supply of service under SAC No. 9899.
ADVANCE RULING PASSED BY Ld. AAR. DAMAN
The learned authority on Advance Ruling considered the application made by the appellant and gave a ruling vide Order No. 01/Daman/2019-20-AR dated 18.07.2019 wherein it held as under:
“In the present case against application dated 09.03.2018 of M/s. Temple Packaging Pvt. Ltd., behind Olive Healthcare, Hatiyawad. Village, Dabhel, Nani Daman, Advance Ruling is given that printing of Pamphlet/leaflet falls under the category of supply of service falling under SAC No. 9989. The case is disposed off accordingly.”
GROUNDS OF APPEAL
Aggrieved by the decision of the Advance Ruling Authority, the Appellant has filed the present appeal. The grounds of appeal are as follows:-
> Leaflet is manufactured on the basis of contract given by the client which is not a printing contract but for supply of printed leaflets (for supply of goods) on agreed consideration and specifically covered under 4901.
> Supply of goods is made on the basis of purchase order issued by the clients for supply of goods under HSN code no. 4901 (specimen copy of purchase order issued by M/s. Mylan Laboratories Ltd. (EOU) and M/s. Par Formulations Pvt. Ltd were attached along with the submission).
> Chapter note no. 2 of Chapter no. 49 specifically covers the terms “printed” and 49011120 covers printed leaflet whether or not in a single sheet, therefore, printed leaflets fall under chapter 49.
> HSN Explanatory note to heading 4901 covers printed leaflet and HSN note read as under:-
“This heading covers virtually all publications and printed matter, illustrated or not, with the exception of publicity matter and products more specifically covered by other headings of the chapter (particularly heading 4902. 4903 or 4904). It includes: (B) Brochures, pamphlets and leaflets, whether consisting of several sheets of reading matter fastened together e.g.. stapled), or of unfastened sheets, or of single sheets.
> Since 2005 till June 2017, the applicants have cleared the printed leaflets under CH 4901 as delivery of exempted excisable goods and in Central Excise regime it is held in various pronouncements including clarification of CBIC that the printed matters printed with the content supplied by the client is falling under Chapter 48 or 49.
> GST rate of goods is specified under Notification no. 1/2017-CT(Rate) dated 28.06.2017. and Schedule-I (Sr. No. 201) specifically provides 5% GST rate for printed leaflets falling under 4901.
> Chapter note no. 5 of Chapter 49 specifically excludes publishing matter from 4901 and accordingly SAC 9989 mainly covers publishing matter only.
> SAC 9989 covers two sub-heading namely 998911 and 998912. SAC 998911 covers publishing matter on a fee or contract basis and SAC 998912 covers printing and reproduction service of recorded media on a fee or contract basis.
> The printed leaflet manufactured in TPPL (the appellant) on behalf of clients mainly in pharmaceutical sector cannot be termed as publishing matter and therefore covered under 4901.
> Notification no. 1/2017-CT(Rate) dated 28.06.2017. (Sr. No. 27). as amended prescribed the GST rate for SAC 9989 and as per the said entry reproduced below the content of printing job is required to be supplied in publisher
