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 ... Supply of goods - supply of service - composite supply - principal supply - ancillary - product of the printing industry - classification under Heading 4911 - applicable GST rate - digital printing transforming blank substrate into finished goodsSupply of goods - supply of service - digital printing transforming blank substrate into finished goods - ancillary - Whether printing of content supplied by the customer on PVC material and supply of the printed trade advertisement material is a supply of goods or a supply of service. - HELD THAT: - The Authority found that the appellant's activity of cutting PVC to size and digitally printing customer-provided content produces a distinct finished product (billboards, banners, free-standing display units) which is the item ordered by the customer. The printing activity transforms blank PVC into an advertising product with a specific use; without printing the PVC would not serve the customer's purpose. The pricing on a square-foot basis and shipment of the finished item indicate supply of a produced article. Consequently, printing is integral to and ancillary to the making of the trade advertisement, and the predominant activity is production and supply of goods rather than rendering of a printing service. The Authority therefore set aside the earlier ruling that treated the transaction as a service. [Paras 12, 14]The transaction is a supply of goods.Product of the printing industry - classification under Heading 4911 - applicable GST rate - If held to be supply of goods, the classification of the printed trade advertisement material and the applicable GST rate. - HELD THAT: - Having held the supply to be of goods, the Authority examined the Customs Tariff and concluded that the printed trade advertisement products fall within Chapter 49 as products of the printing industry and, more particularly, within sub-heading 4911 10 as 'trade advertising material, commercial catalogues and the like'. Accordingly, these goods are covered by the entry for 'Other printed matter' in the relevant GST rate notifications and attract the goods-oriented GST rates specified for heading 4911. The Authority answered the classification and rate question consistent with that heading. [Paras 15, 16]The printed trade advertisements are classifiable under Heading 4911 10 and attract GST as per that classification (inter-state 12% and intra-state 6% CGST + 6% SGST as per the notifications relied upon).Final Conclusion: The AAAR set aside the AAR ruling, held that printing and supply of printed PVC trade advertisements is a supply of goods (not a service), classified the products under Heading 4911 10 as products of the printing industry, and directed that GST be applied accordingly (inter-state at 12%; intra-state at 6% CGST and 6% SGST). 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.