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

The Authority ruled that the applicant's supply of online educational journals and periodicals to educational institutions not covered by the exemption under Notification No.2/2018 was classified as online information and database access services, subject to a 9% tax rate under the CGST and KGST Acts. As the transaction was taxable, input tax credit on inward supplies was not restricted under Section 17 of the CGST Act. Therefore, the applicant was eligible to claim input tax credit without limitations, as the supply did not qualify for exemption under relevant notifications.

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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 Credit
The 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.

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