2022 (7) TMI 750 - AAAR - GST

Advertising space with design services classified as 'Advertising Service' HSN 998361 not space sale HSN 998363

The AAAR-Telangana ruled that supply of advertising space in print media with additional design/artwork services constitutes 'Advertising Service' under ... Advertising services - Sale of advertising space in print media - Sale of other advertising space or time - Composite supply - Principal supply - Classification of services - Applicability of tariff rates under Notification No. 11/2017-CT(Rate)Advertising services - Sale of advertising space in print media - Sale of other advertising space or time - Classification of services - Whether the services supplied by the appellant are to be classified as sale of advertising space in print media or as advertising services under a different SAC. - HELD THAT: - The Appellate Authority examined the explanatory notes to the HSN entries and the nature of activities performed by the appellant. The Authority found that the appellant does not merely supply vacant print-space but also, in some cases, provides design/artwork that affects the content and presentation of the advertisement. Advertising services are defined broadly to include planning, concept development, design of ads and placement of advertisements. Where design/artwork forms part of what is supplied, the activity cannot be reduced to mere sale of vacant print space. The absence of an extra charge for artwork does not alter the nature of the service, since the artwork is provided in the course of business and enhances the advertising activity. On this basis, the Authority held that the appellant's combined activity falls within the broader category of Advertising services (SAC 998361) rather than being classified as simple sale of print-media space or as 'other advertising space or time' (SAC 998366). [Paras 15, 16]Services supplied by the appellant are classifiable as Advertising services under SAC 998361.Applicability of tariff rates under Notification No. 11/2017-CT(Rate) - Composite supply - Principal supply - The rate of GST applicable on the appellant's services following the classification. - HELD THAT: - Having classified the supply as Advertising services (SAC 998361), the Authority considered the tariff entries in Notification No. 11/2017-CT(Rate). The Authority rejected the appellant's submission that the transaction should be treated as a composite supply with sale of space as the principal supply attracting the lower rate, observing that the nature of advertising services encompasses multiple integrated activities (including artwork/design) which are relevant to classification. Consequently, the supply falls under the notification entry applicable to advertising services and not under the reduced rate entry for mere sale of print-media space. Therefore the tax rate for the classified service is that prescribed under the relevant item for advertising services in the notification. [Paras 16, 19]GST is payable at the rate applicable to Advertising services (SAC 998361) as per the relevant entry of Notification No. 11/2017-CT(Rate).Final Conclusion: The Appellate Authority set aside the AAR's classification and ruled that the appellant's supplies constitute Advertising services (SAC 998361); accordingly the supplies attract the GST rate applicable to that classification under Notification No. 11/2017-CT(Rate). Issues Involved:1. Classification of services supplied by the appellant.2. Applicable GST rate on the services supplied.Issue-wise Detailed Analysis:1. Classification of Services Supplied by the Appellant:The appellant, M/s. Time Education Kolkata Private Limited, is engaged in the business of purchasing and supplying advertisement space in print media, along with providing artwork to adorn the space. The core issue is whether this service can be classified under HSN 998363 as 'sale of advertising space in print media' or under a different classification when artwork is included.The appellant argued that their activity, whether with or without artwork, should be classified under HSN 998363, attracting a GST rate of 5% as per Sl. No. 21(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. They contended that the addition of artwork does not change the nature of the service, which remains the sale of advertising space in print media.The Advance Ruling Authority (AAR) initially ruled that the service involving artwork falls under HSN 998366, attracting a higher GST rate of 18%. The AAR distinguished between mere sale of advertisement space in print media (HSN 998363) and other advertising services (HSN 998366), concluding that the latter includes additional services like artwork.Upon appeal, the Appellate Authority examined the explanatory notes for HSN codes and concluded that the appellant's activity, including the provision of artwork, constitutes 'Advertising Services' under HSN 998361. This classification encompasses a range of activities such as planning, concept development, design, and placement of advertisements, which aligns with the services provided by the appellant.2. Applicable GST Rate on the Services Supplied:The appellant sought a GST rate of 5% for their services, arguing that the addition of artwork should not change the classification from HSN 998363. They further contended that if the artwork is considered a separate service, the transaction should be treated as a composite supply under Section 8 of the CGST Act, 2017, with the principal supply being the sale of space in print media, thereby attracting a GST rate of 5%.The AAR had ruled that the inclusion of artwork changes the classification to HSN 998366, attracting a GST rate of 18%. The appellant challenged this, asserting that the artwork is complementary and does not warrant a different classification.The Appellate Authority, however, concluded that the combined service of selling advertisement space and providing artwork constitutes 'Advertising Services' under HSN 998361, which attracts a GST rate of 18% as per Serial No. 21(ii) of Notification No. 11/2017-CT(Rate) dated 28.06.2017. The Authority emphasized that the additional activity of providing artwork enhances the advertisement's appeal and cannot be treated as a mere ancillary service.Conclusion:The Appellate Authority set aside the AAR's classification under HSN 998366 and ruled that the services supplied by the appellant fall under 'Advertising Services' with HSN code 998361. Consequently, the applicable GST rate is 18%. The appeal was disposed of accordingly, modifying the lower authority's ruling to reflect this reclassification and applicable tax rate.