2019 (10) TMI 873 - AAR - GST

Tax Ruling: Online Educational Journals Taxable at 9%, Input Credit Allowed

In Re: M/s. Informatics Publishing Ltd.

The Authority ruled that the applicant's supply of online educational journals and periodicals to educational institutions not covered by the exemption ... Levy of GST - benefit of exemption from GST - online educational journals and periodicals are supplied to the Educational Institutions other than to preschool and higher secondary school or equivalent - N/N. 2/2018 - Central Tax (Rate) dated 25.01.2018. - Input tax credit. HELD THAT:- The transaction of the applicant is covered under the Heading 9984 Telecommunications, broadcasting and information supply services under the Group 99843 and Service Accounting Code of 998631, the description of which is “online text based information such as online books, newspapers, periodicals,, directories and the like”. The articles are covered under the items “and the like” and hence the SAC applicable for the providing access to the portal is 998431. This service is liable to tax at 9% CGST under the entry no.22 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The transaction is liable to tax at 9% under the KGST Act as it is covered by entry no. 22 of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017. Since, the transaction is not exempt and tax is liable to be discharged, the input tax credit on the inward supplies of goods are not restricted or made ineligible under section 17 of the CGST Act. Hence the ineligibility provisions of Section 17(1) and 17(2) are not applicable to the pertinent case of the applicant. Issues:1. Availability of input tax credit on supply of online educational journals and periodicals to educational institutions other than preschool and higher secondary schools exempted by Notification No.2/2018 - Central Tax (Rate) dated 25.01.2018.Analysis:Issue 1: Availability of Input Tax CreditThe applicant sought an advance ruling on the availability of input tax credit when supplying online educational journals and periodicals to educational institutions not covered by the exemption under Notification No.2/2018. The applicant imported various journals and supplied them to educational institutions, arguing that the input tax credit should be available as the supply made to eligible educational institutions is not exempt under Section 17(1) and 17(2) of the CGST Act. The applicant contended that the exemption was conditional, and input tax credit should not be restricted based on the conditional nature of the exemption.The Authority analyzed the nature of the applicant's transactions and found that the applicant provided access to articles published in various journals and papers to subscribers without publishing online journals themselves. The service was deemed as online information and database access and retrieval service, not a sale of online journals. As a result, the transaction did not fall under the exempt category of supply of online educational journals and periodicals to educational institutions under the relevant notification. Instead, it was classified under telecommunications, broadcasting, and information supply services, attracting a tax rate of 9% under the CGST and KGST Acts.The Authority ruled that since the transaction was taxable, input tax credit on inward supplies of goods was not restricted under Section 17 of the CGST Act. Therefore, the applicant was eligible to claim input tax credit without any restrictions, as the transaction did not qualify for exemption under the applicable notifications.In conclusion, the Authority held that the applicant's provision of access to online content fell under a taxable category, and input tax credit was available without any restrictions under the CGST and KGST Acts.