Printed leaflets using printer's materials with customer content classified as composite supply under printing services SAC 998912

AAR Tamil Nadu ruled that manufacture and supply of printed leaflets using printer's own materials with customer-provided content constitutes composite supply under GST. The predominant element is printing service, not goods supply, making it classifiable under SAC 998912 rather than HSN 4901. The transaction involves printing services as principal supply with paper supply being ancillary. Applicable GST rate is CGST 9% and SGST 9% effective from October 2021 under relevant notifications for printing services.

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Issues Involved:
1. Classification of the manufacture and supply of printed leaflet products as supply of goods or services under GST.
2. Determination of the applicable HSN heading or SAC code for the printed leaflet products.
3. Determination of the tax liability payable on the printed leaflet products.

Detailed Analysis:

Issue 1: Classification as Supply of Goods or Services
The applicant, engaged in printing content supplied by the recipient using their own paper and ink, sought clarification on whether this constitutes a supply of goods or services. The applicant argued that the supply should be classified as a composite supply with the principal supply being the printing service, citing CBIC Circular No. 11/11/2017-GST dated 20-10-2017, which clarifies that when the content is supplied by the recipient and the physical inputs are owned by the printer, the principal supply is the printing service. The ruling agreed with this interpretation, stating that the predominant element is the printing service, making it a composite supply with the principal supply being the supply of services under SAC 9989.

Issue 2: Applicable HSN Heading or SAC Code
The applicant contended that the supply should be classified under SAC 9989, specifically under SAC 998912 for "Printing and reproduction services of recorded media, on a fee or contract basis." The ruling confirmed this classification, noting that the supply of printing services on paper falls under SAC 998912. This classification was supported by the CBIC Circular No. 11/11/2017-GST, which differentiates between supply of goods and services based on the principal supply in composite supplies involving printing.

Issue 3: Determination of Tax Liability
The applicable rate of GST for SAC 9989 was examined. Effective from October 1, 2021, the applicable rate is CGST @ 9% as per SI.No.27 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 as amended by Notification No. 06/2021-C.T.(Rate) dated 30th September 2021, and SGST @ 9% as per SI.No. 27 of Notification G.O. (Ms) No. 72 dated 29.06.2017 as amended. The ruling confirmed that the applicable rate of tax for the supply of printed leaflets is 18% (9% CGST and 9% SGST).

Ruling:
1. The manufacture and supply of printed leaflet products, where the content is provided by the recipient and the physical inputs are owned by the printer, is classified as a composite supply with the principal supply being the supply of services.
2. The applicable classification code for this supply is SAC 9989.
3. The applicable rate of tax effective from October 1, 2021, is CGST @ 9% and SGST @ 9%, totaling 18%.

This judgment addresses the classification and taxability of printed leaflet products under GST, providing clarity on the applicable SAC code and the tax rate, ensuring compliance with the statutory provisions and CBIC clarifications.

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