2020 (10) TMI 856 - AAAR - GST

Appellate Authority's Decision on GST Classification for Trade Advertisement Materials

The Appellate Authority determined that the transaction involving printing on PVC banners and supplying printed trade advertisement material constitutes a ... Classification of supply - supply of goods or supply of service - the transaction of printing of content provided by the customer, on Poly Vinyl Chloride (PVC) banners and supply of such printed trade advertisement material - classification of such trade advertisement material if the transaction is supply of goods? - applicable rate of CGST on the supply of such trade advertisement material - CBIC Circular No. 11/11/2017-GST dated 20.10.2017 - challenge to AAR decision. HELD THAT:- The activity of printing the content provided by the customer is what transforms the PVC material from being just a blank PVC material into a trade advertisement. It is this finished product (i.e. either in the form of a Billboard, banner, free-standing display unit, etc) which is supplied by the Appellant. Without the printing activity, the process of making the trade advertisement is incomplete. Therefore, printing is an activity which is integral to the emergence of the trade advertisement. The printing activity undertaken by the Appellant is for the purpose of bringing into existence the trade advertisement which is used by the customer for advertising their products/services. What the customer requires is either a billboard or banner or display unit which advertises his product or service. The requirement of the customer is met by the Appellant through the activity of digital printing on PVC material. We have also seen a few invoices raised by the Appellant on his customers - the charges for the supply of the trade advertisement is based on the sqft of the product supplied. This evidences that what is supplied by the Appellant is in the nature of goods and not a service. The trade advertisements made by the Appellant are classifiable under sub-heading 4911 10 under the category of trade advertising material, commercial catalogues and the like. They will fall under the description goods under Heading 4911 given in entry Sl.No 132 of Schedule II of Notification No 01/2017 CT (R) dated 28.06.2017 - decision of AAR set aside. Issues Involved:1. Whether the transaction of printing content provided by the customer on Poly Vinyl Chloride (PVC) banners and supply of such printed trade advertisement material is a supply of goods.2. Classification of such trade advertisement material if the transaction is a supply of goods.3. Classification and applicable rate of CGST on the supply of such trade advertisement material if the transaction is a supply of service.Issue-wise Detailed Analysis:1. Nature of Supply: Goods or ServiceThe Appellant, engaged in producing various trade advertisements, argued that their activity constitutes a supply of goods. They relied on previous rulings by the AAR of Telangana and AP, which classified similar activities as supply of goods under Heading 4911 with a 12% GST rate. They emphasized that the printed trade advertising materials are movable property and thus qualify as goods. The Appellant highlighted that the definition of 'service' under Section 2(102) of the CGST Act implies that a supply is considered a service only if it does not qualify as a supply of goods. They also referred to Schedule II of the CGST Act, which states that any transfer of the title in goods is a supply of goods. The Appellant cited the Supreme Court decision in CCE-IV vs Fitrite Packers, which held that printing activities that give a distinct character to a product amount to the manufacture of goods.2. Classification of Trade Advertisement MaterialThe Appellant contended that their products fall under Chapter 49 of the Customs Tariff Act, which deals with printed products. They argued that the printed PVC materials should be classified under Heading 4911, as they are products of the printing industry. They cited Section Note 2 to Section VII of the Customs Tariff Act, which states that printed plastics fall under Chapter 49 if the printing is not merely incidental to the primary use of the goods. The Appellant also referred to various judicial decisions and CBIC Circulars that supported their claim that printed trade advertisements should be classified under Heading 4911.3. Composite Supply ConsiderationThe Appellant argued that their supply should not be considered a composite supply, as the primary supply is the trade advertisement material itself, not the printing service. They emphasized that the customers intend to purchase the finished trade advertisements, not just the printing service. They cited CBIC Circular No 11/11/2017-GST, which clarifies that in cases where the predominant supply is that of goods, the supply of printing is ancillary, and thus the entire supply should be treated as a supply of goods.Appellate Authority's Findings:The Appellate Authority examined the nature of the Appellant's activities and concluded that the process of printing on PVC material results in a distinct product used for advertising. The Authority disagreed with the lower Authority's reliance on CBIC Circular No. 11/11/2017-GST, stating that the contract was for the supply of trade advertising material, not a printing service. The Authority held that the activity of digital printing on PVC material brings into existence a new product, which is classified under Heading 4911 as trade advertising material.Order:1. The transaction of printing content provided by the customer on PVC banners and supply of such printed trade advertisement material is a supply of goods.2. The trade advertisements printed and supplied by the appellant are classifiable under Chapter Heading 4911 10 of the Customs Tariff Act and attract a GST rate of 12% for inter-state supplies and 6% CGST and 6% SGST for intra-state supplies.3. The question of the applicable rate of CGST on the supply of such trade advertisement material as a service is not applicable since the transaction is held to be a supply of goods.The appeal filed by the Appellant is disposed of on these terms.