GST Rate for Sale of Space in Print Media: AAR Maharashtra Ruling

In re Lokmat Media Private Limited (GST AAR Maharashtra)

In a recent ruling by the Maharashtra Authority for Advance Ruling (AAR), the GST rate and classification for selling space in print media have been clarified. The case in question, In re Lokmat Media Private Limited, addresses key issues surrounding the applicability of GST rates and exemptions for services provided by a leading newspaper house, Lokmat Media Pvt Ltd.

Lokmat Media Private Limited, a prominent newspaper house in Maharashtra, provides services related to the sale of advertising space in newspapers and other print media, categorized under SAC Code 9986. The company supplied these services to Pune Municipal Corporation (PMC) and Pimpri Chinchwad Municipal Corporation (PCMC). The core issue was whether these services are subject to GST and, if so, at what rate.

Details of the Transactions:

1. PMC Transaction:
   • Invoice Date: 19-08-2017
   • Invoice Amount: ₹36,400 (Net) + ₹3,640 (CGST) + ₹3,640 (SGST)
   • Description: Selling of space for advertisement in print media.
2. PCMC Transaction:
   • Invoice Date: 16-06-2018
   • Invoice Amount: ₹2,11,200 (Net) + ₹5,280 (CGST) + ₹5,280 (SGST)
   • Description: Selling of space for advertisement in print media.

The PMC had claimed that GST should not apply to advertisements related to public functions, citing that such advertisements should be exempt under specific GST notifications.

GST Rate and Classification

The ruling revolved around the following critical issues:

1. Pure Service vs. Composite Supply:
   • Pure Service Classification: According to Entry No. 3 of Notification 12/2017-Central Tax (Rate), pure services provided to governmental authorities are exempt from GST. Lokmat Media Pvt Ltd argued that selling advertisement space in print media qualifies as a pure service.
   • Composite Supply: On the other hand, the contention that this supply could be a composite supply (i.e., involving both goods and services) was considered but ruled out. The ruling clarified that selling space for advertisements does not involve a significant supply of goods (such as paper and ink), thus it remains a pure service.
2. Local Authorities’ Status: Both PMC and PCMC are classified as local authorities under Section 2(69) of the GST Act. This classification affirms that they qualify for the exemptions available to local authorities.
3. Connection to Functions Entrusted to Local Authorities:
   • PMC’s Function: The advertisements in question were for recruitment purposes related to medical officers and professors for PMC’s hospital establishment.
   • PCMC’s Function: Similarly, PCMC’s advertisements were for recruitment related to its medical college.

   The key question was whether these advertisements are “in relation to” the functions entrusted to local authorities under Articles 243G and 243W of the Constitution. The ruling established that these advertisements, although not directly listed in the schedules, have a remote but relevant connection to the functions related to health and education.

Findings and Decision

1. Pure Service Status: The ruling affirmed that selling space for advertisements is a pure service. The space itself is sold without transferring any property in goods (i.e., paper and ink). The recipient only acquires the right to have their advertisement published.
2. Exemption Applicability: Since the service is deemed a pure service, it is not eligible for exemption under Entry No. 3 of Notification 12/2017-Central Tax (Rate) unless the service is directly related to the functions specified under Articles 243G and 243W. In this case, while the connection to these functions is remote, the service itself is not exempt.
3. Local Authorities’ Role: Both PMC and PCMC being local authorities does not automatically exempt the service from GST. The exemption is contingent upon the service being directly related to functions enumerated in the Constitution.
4. Relation to Constitutional Functions: The ruling concluded that the advertisements for recruitment, while necessary, do not directly relate to the functions under Articles 243G and 243W. Therefore, the exemptions provided for pure services in relation to these functions do not apply.

The AAR Maharashtra ruling in the case of Lokmat Media Private Limited provides clarity on the GST treatment for the sale of advertising space in print media. The decision underscores the distinction between pure services and composite supplies, the importance of the local authority status, and the nuanced interpretation of constitutional functions related to GST exemptions.