2018 (9) TMI 690 - AAR - GST

Printing leaflets/pamphlets classified as supply of services under SAC 9989, not goods under Chapter 4901

IN RE: TEMPLE PACKAGING PVT. LTD.

The AAR ruled that printing of leaflets/pamphlets constitutes supply of services under SAC No.9989 rather than supply of goods under Chapter Sub-heading ... Classification of activity - printing of leaflet - supply of goods or supply of services - mixed supply - whether the goods/service (under question) has to be considered as supply of goods falling under Chapter Sub-heading No.4901 or as a supply of service falling under SAC No.9989? Held that:- It is on record that the applicant have submitted one of the sample of a printed pamphlet along with their defence reply which is made for “Norethindrone tablets USP,0.35 mg”. On simple reading of the said pamphlet it appears that the buyer of the product wanted to convey certain message through the said pamphlet which is supplied alongwith their product. In fact, the product pamphlet in itself is nothing but a media to convey the message and the message or script what is to be printed, is supplied by the buyer of the product. The said supply is a mixed supply as per Section 2(74) of the CGST Act, 2017 and in the mixed supply dominance is the message printed on the pamphlet. Para 4 of Circular 11/11/2017-GST dtd. 20.10.2017 specifically clarifies that in the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services. Accordingly pamphlets, brochures annual reports etc are covered under the services and the applicant is engaged in printing of pamphlets etc. hence, the correct classification of the product of the applicant is 9989. Ruling:- The printing of Pamphlet/leaflet falls under the category of Supply of Service falling under SAC No.9989. Issues Involved:1. Classification of printed leaflets: Whether they fall under the category of supply of goods (CHS No. 4901) or supply of services (SAC No. 9989).Issue-wise Detailed Analysis:1. Classification of Printed Leaflets:The applicant, M/s Temple Packaging Pvt Ltd, engaged in printing leaflets, sought an advance ruling to determine if their printed leaflets should be classified as goods under CHS No. 4901 or as services under SAC No. 9989. They argued that their printed leaflets, made from their own raw materials and sold on a principal-to-principal basis, should be classified as goods under CHS No. 4901, attracting 5% GST as per Sr.No.201 of Schedule-1 of Notification No.1/2017-CT (Rate) dated 28.6.2017.Applicant's Arguments:- Historical Classification: Since 2005, the applicant had been clearing printed leaflets under CSH No. 4901 as exempted goods. Post-GST, they continued this classification until a clarification from the All India Federation of Master Printers suggested a shift to SAC No. 9989.- CBEC Circular No. 11/11/2017-GST: The applicant cited this circular, arguing it did not conclusively clarify the classification of leaflets when sold outright.- Definition of Goods and Services: The applicant emphasized that leaflets are movable property and thus should be classified as goods under Section 2(52) of the CGST Act, 2017.- Principal Supply: They argued that the principal supply in their case was the supply of goods, as the content provided by the customer was ancillary.- Customs Tariff and EPCG License: They highlighted that under the Customs Tariff, printed leaflets are treated as goods, and their EPCG license requires fulfilling export obligations by supplying goods under CSH 4901.Authority's Findings:- Nature of Product: The authority noted that the applicant's activity involved printing content supplied by the customer on materials owned by the applicant. The primary nature of the leaflets was to convey a message, making them a form of service.- Circular No. 11/11/2017-GST: The authority referred to this circular, which clarified that printed materials where content is supplied by the customer are composite supplies. The principal supply in such cases is the supply of service under SAC No. 9989.- Pre-GST Circulars and Judgments: The authority found that pre-GST circulars and judgments cited by the applicant were not applicable under the GST regime.- Binding Nature of CBEC Circulars: The authority emphasized that CBEC circulars are binding on departmental officers, citing Supreme Court judgments in Dhiren Chemical Industries and Madras Steel Re-Rollers Association.Conclusion:The authority concluded that the printed leaflets supplied by the applicant, where content is provided by the customer, constitute a supply of service under SAC No. 9989. The printed leaflets are not classified as goods under CHS No. 4901. Therefore, the correct classification for the printed leaflets is under SAC No. 9989, attracting GST as per the relevant rate for services.Order/Advance Ruling:The authority ruled that the printing of pamphlets/leaflets by M/s Temple Packaging Pvt Ltd falls under the category of supply of services under SAC No. 9989. The case was disposed of accordingly.