Printing company's leaflets classified as composite supply of goods and services under GST

The AAAR upheld the advance ruling authority's decision regarding a printing company's supply classification. The appellant printed leaflets using their own paper and ink with content provided by pharmaceutical clients. The authority determined this constituted a composite supply involving both goods and services that were naturally bundled in the ordinary course of business and supplied in conjunction. The appellant's arguments about practical difficulties under EPCG/Advance License schemes and deemed export refund claims were rejected, as classification cannot be based on potential loss of other benefits. The ruling confirmed the supply as composite rather than purely goods or services.

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Issues Involved:
1. Classification of the supply of printed leaflets.
2. Determination of whether the supply constitutes goods or services.
3. Interpretation of relevant GST provisions and circulars.
4. Practical difficulties faced by the appellant under various schemes.

Detailed Analysis:

1. Classification of the Supply of Printed Leaflets:
The appellant, engaged in printing leaflets using their own paper and ink but with content supplied by clients, sought clarification on whether this activity falls under the category of supply of goods (CHS No. 4901) or supply of services (SAC 9989). The Advance Ruling Authority ruled that printing of pamphlets/leaflets falls under the category of supply of service (SAC No. 9989).

2. Determination of Whether the Supply Constitutes Goods or Services:
The appellant argued that the supply of leaflets should be classified as goods under HSN No. 4901, citing historical classification under the Central Excise regime and various pronouncements. They contended that the transaction involved the supply of goods (leaflets) with the ancillary service of printing. The appellant referenced Section 8(a) of the CGST Act, 2017, which states that in the case of composite supply, the tax liability should be determined based on the principal supply. They asserted that the principal supply in their case was the leaflet (goods), not the printing (service).

3. Interpretation of Relevant GST Provisions and Circulars:
The appellate authority examined the CBIC Circular No. 11/11/2017-GST dated 20.10.2017, which clarified the taxability of printing contracts. The circular distinguished between items like books, pamphlets, brochures (where printing is the principal supply, thus classified as services) and items like printed envelopes, letter cards (where the goods are the principal supply, thus classified as goods). The authority found that the appellant’s case fell under the former category, as the primary purpose of the transaction was to print content provided by the client, making the printing service the principal supply.

4. Practical Difficulties Faced by the Appellant Under Various Schemes:
The appellant highlighted practical difficulties in fulfilling export obligations and claiming refunds under the EPCG/Advance License Scheme and SEZ supplies if their supply was classified as services. However, the appellate authority stated that practical difficulties should not influence the legal classification of the supply.

Conclusion:
The appellate authority upheld the ruling of the Advance Ruling Authority, confirming that the supply of printed leaflets by the appellant constitutes a supply of services under SAC No. 9989. The appeal was disposed of accordingly, with no changes to the original ruling.

Ruling:
For the reasons discussed, the appellate authority found no reason to interfere with the order of the Advance Ruling Authority, thereby disposing of the appeal accordingly.

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