Printing on PVC banners: Service, not goods. GST rates apply. Appeal dismissed.

The Authority determined that the transaction involving printing of content on PVC banners and supply of printed trade advertisement materials constitutes a composite supply with the principal supply being the service of printing. The Appellant's argument that it should be classified as a supply of goods was rejected, and the activity was deemed to fall under SAC 998912, attracting the applicable GST rates for services. The original ruling was upheld, and the appeal was disposed of accordingly.

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Issues Involved:
1. Whether the transaction of printing of content provided by the customer on PVC banners and supply of such printed trade advertisement 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 GST on the supply of such trade advertisement material if the transaction is that of a supply of services.

Detailed Analysis:

Issue 1: Whether the transaction of printing of content provided by the customer on PVC banners and supply of such printed trade advertisement is a supply of goods.

The Appellant argued that their activity constitutes a supply of goods, specifically trade advertisement materials, and not a composite supply of goods and services. They claimed that the printed trade advertisement materials are tailor-made goods manufactured as per customer specifications. The Appellant contended that the principal supply is the supply of goods (trade advertisement material) and the activity of printing is ancillary to this supply.

The Authority, however, held that the activity is a composite supply where the principal supply is the service of printing. The Authority reasoned that the Appellant does not own the usage rights of the intangible inputs provided by the customer and that there is a transformation in the nature of physical inputs, which aligns with paragraph 4 of Circular No. 11/11/2017-GST dated 20.10.2017. This paragraph states that printing services are the principal supply when the physical inputs change significantly due to the printing process.

Issue 2: Classification of such trade advertisement material if the transaction is a supply of goods.

The Appellant maintained that if the transaction is considered a supply of goods, the printed advertisement materials should be classified under Heading 4911, which covers trade advertising material. This classification was supported by various rulings and circulars, including the Board’s Circular F. No. 332/2/2017-TRU dated 07.12.2017, which clarified that posters printed on synthetic media fall under HS Code 4911 and attract 12% GST.

Issue 3: Classification and applicable rate of GST on the supply of such trade advertisement material if the transaction is that of a supply of services.

The original authority classified the service under SAC 998912 with an applicable tax rate of 9% CGST + 9% SGST for the period 01.07.2017 to 13.10.2017, and thereafter 6% CGST + 6% SGST as per the relevant notifications. The Appellant argued that even if considered a composite supply, the principal supply should be the supply of goods, thereby attracting the GST rate applicable to goods under Heading 4911.

Personal Hearing and Further Submissions:

During the virtual personal hearing, the Appellant reiterated their position that the activity should be considered a supply of goods. They also referenced the Karnataka Appellate Authority’s ruling in their favor, which held that digital printing on PVC material constitutes a supply of goods.

Discussion and Conclusion:

The Authority examined the nature of the contract and the transaction, referencing several judicial precedents. They concluded that the primary difference between a contract for work or service and a contract for sale is that in the former, the person rendering the service does not have property in the thing produced as a whole. Applying this to the case at hand, the Authority determined that the Appellant’s activity is a contract for work or service, not a contract of sale of goods. The Authority found that the printed trade advertisement material is produced by printing the customer’s content on the Appellant’s media, and the copyright of the content remains with the customer.

The Authority held that the activity is a composite supply with the principal supply being the service of printing. The supply of the media (PVC material) is incidental to the principal supply of printing services. Therefore, the transaction is classified as a supply of services under SAC 998912, with the applicable GST rates as previously determined.

Order:

The Authority upheld the original ruling, confirming that the transaction is a composite supply with the principal supply being the service of printing. The subject appeal was disposed of accordingly.

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