In re Markk Business Private Limited (GST AAR Rajasthan)
The activity of printing of Answer Booklets/ Answer copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper, printing ink etc. is Supply of Goods falling under Heading/Tariff item 4820 of entry no. 123 of the schedule II to amended and chargeable to the Notification 01/2017 dated 28/06/2017 as GST @ 12% (CGST 6% + SGST 6%).
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order.
> At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the “GST Act”.
> The issue raised by M/s Markk Business Private Limited, Plot No., Near Seva Sadan, Adarsh Nagar, Jaipur-302004 Rajasthan -(hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under: –
a. Classification of goods and /or services or both;
> Further, the applicant being a registered person (GSTIN is 08AAICM8786G1ZT as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling.
A. SUBMISSION AND INTERPRETATION OF THE APPLICANT;
1. The applicant is engaged in the business of supplying answer booklets / copies to educational institutions. The process involves:-
> procuring of raw material i.e. paper roll
> performing the activity of printing of the content provided by such educational institution such as its Name, Logo, Serial No. and other particulars and lines on such paper roll with the help of the machinery.
> Printed paper is then cut in required size and numbers. It is important to mention here that answer booklet is usually blank except for name of the educational institution on cover page with some particulars and its logo on every page so that it can be identified to that educational institution.
> Paper so cut is then stitched in required number of sheets to form answer booklet. Then the number of booklets is arranged in lot of 100/200 to form bundles which are then packed and delivered to the educational institutions.
> The answer booklets may be with or without OMR sheets which is printed separately depending upon the work order. If the work order is with OMR sheet, then the OMR sheet is printed separately and then tied to answer booklet.
> Consideration from educational institution is received on the basis of number of answer booklets supplied. The major component of cost of the answer booklet is paper. Out of total cost per answer booklet approx. 80% of cost is of the paper and the balance 20% is cost of printing, packaging etc. of the required content.
2. Question -1: Whether the activity of printing of Answer Booklets / Answer Copies and supplying it to Educational Institutions to be used in examinations by using its own raw material consisting of paper, printing ink etc. is ‘Supply of Goods’ or ‘Supply of Service?
Applicant’s interpretation of law
From the facts narrated in Annexure-II it is evident that the supply of Answer Booklet to the Educational Institutions is Composite Supply of goods and services. The issue as to whether the supply of answer booklet is supply of goods or supply of service would be determined on the basis of what constitutes the Principal Supply in such Composite Supply. The term ‘Composite Supply’ and ‘Principal Supply’ have been defined under Section 2(30) and 2(90) of the CGST Act, 2017 respectively. Relevant extract of which is reproduced as under: –
Sec. 2(30) “Composite Supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Sec. 2(90) “Principal Supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.
3. The activity of printing of Answer Booklet involves procuring of raw material which is paper and thereafter, printing the content provided by educational institution such as its Name, Logo, Serial No. and other particulars and lines on such paper with the help of the machinery and once the printing is done the printed paper is cut in required size and numbers. Paper so cut is then stitched in required number of sheets to form answer booklet. It is important to mention here that lined pages of answer booklet are blank except for name of the educational institution on the cover page with some particulars and its logo on every page so that it can be identified to that educational institution. Then the number of booklets is arranged in lot of 100/200 to form bundles which are then packed and delivered to the educational institutions. Consideration from educational institution is received on the basis of number of Answer Booklets supplied. The major component of cost of the Answer Booklet is paper. Out of total cost per answer booklet approx.80% of cost is of the paper and the balance 20% is cost of printing, packaging etc. of the required content. Further, the printing is incidental to its primary use which is writing. The major cost of the answer booklet is of paper and the cost of printing is only minimal. That even under the Pre-GST era such answer booklets were considered as an activity of manufacturing and not service as evident from the Circular No. 1052/1/2017-CX dated 23.02.2017 according to clause (d) of which Answer Booklet was classifiable under CETH-4820. Reliance is also placed on the Circular No. 11/11/2017-GST dated 20.10.2017 which also postulates the theory that in case of printing contracts whether supply constitutes supply of goods or supply of services would be determined on the basis of what constitutes the principal supply. Para 5 of the said circular clarifies that in case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper, etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content supplied by the recipient of supply is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff. Hence, the supply of Answer Booklets to Educational Institution is Supply of Goods and not Service.
4. Question No. 2: If the answer to the Question No.1 is ‘Supply of Goods’ then
a. whether the said answer booklet is classifiable under Chapter Heading -4820 or 4911;
b. what will be the rate of tax chargeable on said item 12% or 18%?
Applicant’s interpretation of law
a. Classification
That according to the applicant the Answer Booklet is classifiable under Chapter-4820 of the GST Tariff and chargeable to GST rate of 12% which is applicable in case of notebook. As answer book is nature of notebook only the same is also chargeable at 12%. In ease of Answer Booklets printing is merely incidental to its primary use which is writing. The same is in case of notebook which is classifiable under Chapter Heading 4820. In the instant case the principal supply is that of goods and supply of printing of the content (Name of educational institution, logo, S. No. etc.) supplied by the educational institution is ancillary to the principal supply which is of goods. The applicant places reliance on the Chapter Note 12 of Chapter-48 of Customs Tariff which are also made applicable to rate schedule of GST in terms of explanation (iii) and (iv) of the GST Rate Schedule. According to Chapter Note 12 paper or paperboard printed with motif, characters or pictorial representations not merely incidental to the primary use of the goods fall in Chapter-49. Whereas in the case of the applicant printing of name, logo and serial no. of educational institution is merely incidental to its primary use which is writing therefore, such answer booklets are classifiable under Chapter-48 of the GST Rate Schedule. Further, reliance is placed on the Circular No.1052/1/2017-CX dated 23.02.2017 issued under the Central Excise Regime relevant extract of which is reproduced as under: –
Representations have been received from trade associations that consequent upon insertion of Chapter note 14 (w.e.f. 28-5-2012) to the Chapter 48 of Central Excise Tariff Act, 1985 disputes have cropped up in respect of classification of railway/bus/other tickets/passes, railway ticket rolls and bus ticket rolls, mark sheets/certificates, OMR Sheets/Answer Books with OMR, Answer booklets, inland letter cards, passbooks, applications forms, paper outer strip seal, Railway receipt (RR) and practical notebook. Also, reports received from field formations suggest that there is divergent practice of assessment of these goods. It is therefore, proposed to clarify the classification of these goods to ensure uniformity in practice of assessment across the country.
2. In this connection, statutory provisions are as under :
(a) As per Rule 3(c) of General Rules for the interpretation of the Schedule, “when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration”.
(b) As per Rule 4 of General Rules for interpretation of the Schedule, “goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin”.
(c) As per Chapter note 10 of Chapter 48, heading 4820 does not cover loose sheets or cards, cut to size, whether or not printed, embossed or perforated.
(d) As per Chapter note 12 of chapter 48, except for the goods of heading 4814 or 4821, paper, paperboard, cellulose wadding and articles thereof, printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of goods, fall in Chapter 49.
(e) As per Chapter note 14 (inserted on 28-5-2012) paper and paper products of heading nos. 4811, 4816 or 4820 intended to be used for further printing or writing are classifiable in their respective headings even if printing is merely incidental to the primary use of goods.
(f) HSN explanatory note (2) to heading 48.20 excludes educational workbooks, sometimes called writing books, with or without narrative texts, which contain printed textual questions or exercises not incidental to their Primary use as workbooks and usually with spaces for completion in manuscript. Further, as per HSN explanatory notes (A) to heading 4901, “…literary works of all kinds, textbooks (including educational workbooks sometimes called writing books) with or without narrative texts which contain questions or exercises (usually with spaces for completion in manuscript); technical publications…. ” are classifiable under this heading.
(g) Also, as per HSN explanatory notes to heading 49.01 printed cards bearing personal greetings, messages or announcements (heading 49.09), and printed forms which require the insertion of certain additional information for completion are excluded from this heading.
(h) As per explanatory notes to heading 4907 (F), “Stock, share or bond certificates and similar documents of title are formal documents issued, or for issue, by public or private bodies conferring ownership of, or entitlements to, certain financial interests, goods or benefits named therein. Apart from the certificates mentioned these documents include letters of credit, bills of exchange, travellers’ cheques, bills of lading, title deeds and dividend coupons. They usually require completion and validation.”
(i) As per explanatory note to heading 49.11, “Certain printed articles may be intended for completion in manuscript or typescript at the time of use but remain in this heading provided they are essentially printed matter. Thus, printed forms (e.g., magazine subscription forms), blank multi-coupon travel (e.g., air, rail and coach) tickets, circulars, letters, identity documents and cards and other articles printed with messages, notices, etc., requiring only the insertion of particulars (e.g. dates and names) are classified in this heading……”. The heading 4911 also includes tickets for admission to places of entertainment (e.g., cinemas, theatres and concerts), tickets for travel by public or private transport and other similar tickets.
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(a)-(b)
(c) OMR sheets – Like mark sheets and certificates these are loose sheets cut to size and therefore are not covered under heading 4820 and also provision of Chapter note 14 is inapplicable in the matter. The printing on these documents gives their essential character. In view of explanatory note to heading 4911 they are classifiable under heading 4911.
(d) Answer books with or without OMR, answer booklets and passbooks These are not loose sheets, cut to size and therefore these are not out of the purview of heading 4820. Printing on these goods is merely incidental and such goods are intended to be used for further printing or writing. Answer books with or without OMR and answer booklets are intended for completion in manuscript while passbooks are intended for completion in manuscript or typescript. Provisions of Chapter note 12 and 14 of Chapter 48 and provisions of Rule 4 of General Interpretative Rules are applicable in the matter and therefore these are classifiable under heading 4820.
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From the perusal of the aforesaid circular it is evident that the answer booklets are classifiable under Chapter Heading- 4820. The same principal; whether the printing is incidental to its primary or not is determining factor for deciding the classification of goods between Chapter-48 or 49; has been followed in Circular No. 1057/06/2017-CX dated 07.07.2017 while determining the classification of Printed Workbooks, Exercise Books etc.
b. Rate of tax
The GST rate under S.No. 123 ‘Exercise Book, Graph Book, & Laboratory Notebook and Notebooks’ of Schedule-II of the GST Rate on Goods is 12%, hence, the Answer Booklets being in nature of Notebook is chargeable to GST rate of 12%.
Question No. 3: If the answer to the Question No.1 is ‘Supply of Services’ then
a) Whether such service is eligible to be treated as exempted supply of service by virtue of S. No. No. 66(b)(iv) of the Notification No. 12/2017 -Central Tax (Rate) dated 28.06.2017 as amended; Entry No. 69(b)(iv) of Notification No. 2/2018- Integrated Tax (Rate) dated 28.06.2017 as amended; Entry No. 66(b)(iv) of Notification No. F. 12(56) FD/Tax/2017-Pt-I-50 dated 29.06.2017 issued by Tax Division of Government of Rajasthan as amended?
b) If not exempted service, then whether the said service is classifiable under Service Accounting Code / Head – 9989 or 9992 under CGST Notification No.11/2017-CT(Rate) dated 28.06.2017 as amended; IGST Notification No. 8/2017-Integreted Tax (Rate) dated 28.06.2017 as amended; Notification No. F. 12(56) FD/Tax/2017-Pt-I-49 dated 29.06.2017 issued by Tax Division of Government of Rajasthan as amended?
c) What will be the rate of tax on such service under aforesaid notification?
