Classification of Answer Booklets: Supply of Goods or Services? AAR Rules on GST Rate

The case involved determining whether printing and supplying answer booklets to educational institutions constituted a 'Supply of Goods' or 'Supply of Services,' the classification of the answer booklets under the appropriate Chapter Heading, and the applicable rate of tax. The Authority for Advance Ruling (AAR) ruled that the activity was classified as a "Supply of Goods" under Heading/Tariff item 4820, and the applicable GST rate was 12% (CGST 6% + SGST 6%). The AAR concluded that the supply of answer booklets was a supply of goods, not services, and therefore exempted from addressing the tax rate for services.

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Issues Involved:

1. Whether the activity of printing and supplying answer booklets to educational institutions constitutes a 'Supply of Goods' or 'Supply of Services'.
2. Classification of the answer booklets under the appropriate Chapter Heading.
3. Determination of the applicable rate of tax on the answer booklets.
4. If classified as 'Supply of Services', eligibility for exemption and appropriate Service Accounting Code (SAC) and applicable tax rate.

Issue-wise Detailed Analysis:

1. Supply of Goods or Supply of Services:

The applicant is engaged in the business of supplying answer booklets to educational institutions. The process includes procuring raw materials, printing the content provided by educational institutions, cutting, stitching, bundling, and delivering the booklets. The major cost component is the paper (80%), with printing and packaging accounting for the remaining 20%.

The applicant contended that the supply of answer booklets is a composite supply of goods and services, with the principal supply being the goods (answer booklets). They referenced Section 2(30) and 2(90) of the CGST Act, 2017, which define 'Composite Supply' and 'Principal Supply'. They argued that the primary use of the answer booklets is for writing, making the printing incidental.

The Authority for Advance Ruling (AAR) observed that the supply of answer booklets, where the content is provided by the recipient and the physical inputs belong to the printer, constitutes a supply of goods. This is in line with Circular No. 11/11/2017-GST, which clarifies that the principal supply in such cases is the goods, and the printing is ancillary.

2. Classification under Chapter Heading:

The applicant suggested that the answer booklets should be classified under Chapter Heading 4820, similar to notebooks, as the printing is incidental to their primary use for writing.

The AAR referred to Circular No. 1052/1/2017-CX and Circular No. 1057/06/2017-CX, which classify answer booklets under Chapter Heading 4820. The circulars clarify that answer booklets, with or without OMR, are not loose sheets and are intended for writing, making the printing incidental. Hence, they fall under Chapter Heading 4820.

3. Applicable Rate of Tax:

The applicant argued for a GST rate of 12%, applicable to notebooks under Chapter Heading 4820.

The AAR confirmed that the answer booklets fall under Heading/Tariff item 4820 of entry 123 of Schedule II to the Notification No. 01/2017-Central Tax (Rate), dated 28/06/2017, as amended. Therefore, the applicable GST rate is 12% (CGST 6% + SGST 6%).

4. If Classified as Supply of Services:

The applicant also sought clarity on the classification and tax rate if the supply is considered a service. They argued that if treated as a service, it should be exempt under Entry No. 66(b)(iv) of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, which exempts services related to the conduct of examinations by educational institutions.

However, the AAR did not need to address this issue as they concluded that the supply of answer booklets is a supply of goods.

Ruling:

The activity of printing and supplying answer booklets to educational institutions using the applicant's raw materials is classified as a "Supply of Goods" under Heading/Tariff item 4820 of entry no. 123 of Schedule II to the Notification No. 01/2017-Central Tax (Rate) dated 28/06/2017, as amended, and is chargeable to GST at 12% (CGST 6% + SGST 6%).

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